The tech industry has been powering the stock market to all-time highs. If you look at the top holdings in the S&P 500, you will see plenty of tech companies. Most of the Magnificent Seven stocks are tech companies, and they even have a special ETF that has been outperforming the S&P 500 and the Nasdaq Composite. This fund, the Roundhill Magnificent Seven ETF (NASDAQ:MAGS) demonstrates what’s possible in tech.
However, you don’t have to buy tech giants to outperform the stock market. In fact, some investors would argue that you can get more gains by focusing on smaller corporations. Granted, we’re still talking about companies with market caps approaching $100 billion, so they’re not petite.
Tech is a common standout in bullish economic cycles. Many tech firms have the ability to scale in ways that are difficult for other sectors. With that in mind, these tech stocks look poised to deliver impressive returns during the next bull run.
Crowdstrike (CRWD)
Corporations and small businesses need to keep themselves safe from cyberattacks. A breach can cost millions of dollars between stolen data, lost business, legal fees and other costs.
Rather than deal with all of those expenses, companies are turning to cybersecurity firms like Crowdstrike (NASDAQ:CRWD) to protect their data.
The Crowdstrike Falcon Platform helps businesses detect threats and address them before they get serious. Crowdstrike also identifies several ways to fortify your cybersecurity, and the company even uses AI to act as an additional safeguard against hackers.
The cybersecurity industry has endured some headwinds in recent quarters, but none of those headwinds have slowed down Crowdstrike’s growth. Revenue increased by 33% year-over-year in Q1 FY25, while net income came to $42.8 million.
It’s important to remember that other cybersecurity firms are decelerating in meaningful ways to regain growth. Crowdstrike has been using this opportunity to gain market share, and it’s possible for growth rates to accelerate once the headwinds go away.
Upwork (UPWK)
Upwork (NASDAQ:UPWK) has been a storied stock since the pandemic. In roughly one year, Upwork went from trading at $5 a share to exceeding $60 at its all-time high.
Remote work has become more popular, and many people use Upwork to find job opportunities. However, the stock got a bit ahead of itself during that rally and is down by more than 80% from its peak.
A few things have changed at Upwork ever since many investors tuned out. The company is now profitable and recently delivered $18.4 million in net income in Q1 2024. That’s a 7.4% year-over-year improvement. Revenue was up by 19% year-over-year in that quarter and came to $190.9 million.
After sliding by 27% to start the year, the stock now has a 31 P/E ratio. Upwork is still generating plenty of demand. Active clients increased by 5% year-over-year to exceed 872,000. As remote work and freelancing become commonplace, Upwork should continue to grow.
Upwork also has a few exciting monetization opportunities. Its Freelancer Plus subscription service now has 100,000 active subscribers and generated 76% year-over-year revenue growth.
Ad revenue surged by 93% year-over-year and is the company’s fastest-growing revenue stream. Advertisements are also known for their high-profit margins and can translate into a lower P/E ratio for the stock.
The company’s Q2 revenue guidance ranges from $190 million to $195 million. It represents a 14.2% year-over-year growth rate at the midpoint.
Duolingo (DUOL)
Millions of people learn new languages every year. Some people pick it up as a hobby while others use language learning apps and resources to acclimate themselves to new cultures.
Duolingo (NASDAQ:DUOL) is a popular educational app that makes it easy and affordable for people to learn new languages.
The app guides users through written and verbal exercises designed to teach them basic concepts. Then, the lessons become more advanced as you progress through the app. Duolingo currently has 97.6 million monthly active users, as well as 31.4 million daily active users. The app gets a lot of activity, and the engagement has translated into impressive financial growth.
Revenue increased by 45% year-over-year in Q1 2024 to reach $167.6 million. Net income came in at $27.0 million compared to a $2.6 million net loss in the same period last year. Profit margins are expanding and revenue growth remains strong.
While the stock is only up by 42% over the past five years, its fortunes should turn around quickly.
On this date of publication, Marc Guberti held a long position in CRWD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
