Growth stocks stumbled back in 2022 along with a surge in interest rates.
Sentiment also turned negative on many technology stocks that saw their fortunes lifted by the pandemic’s effects.
Despite the dour mood, there are still pockets of strong growth exhibited by select companies.
In particular, the software-as-a-service (SaaS) sector has seen stable and consistent growth because of locked-in subscriptions amid a sustained surge in demand for cloud computing.
If you are a growth investor looking for investment ideas, the SaaS segment could present interesting opportunities as the general sentiment remains weak for growth stocks, thus keeping share prices attractive vis-à-vis a year ago.
Here are four US SaaS stocks that continue to exhibit healthy growth despite the macroeconomic headwinds.
Okta (NASDAQ: OKTA)
Okta offers identity management services to corporations by allowing them to toggle access to different applications for different groups of employees.
The SaaS company is well-known for providing secure access and authentication to help organisations manage their access requirements to sensitive data.
For its fiscal 2023 (FY2023) ending 31 January 2023, Okta reported a 43% year on year jump in revenue to US$1.86 billion.
Subscription revenue made up the bulk (96.2%) of total revenue and increased by 44% year on year to US$1.79 billion.
Billings, which are an indication of forward revenue, rose 24% year on year to US$2.12 billion.
Free cash flow clocked in at US$65 million for FY2023, slightly below the US$87 million generated in FY2022.
Okta expects its revenue for FY2024 to enjoy a 16% to 17% year on year growth as it continues to grow its customer base.
For FY2023, total customers increased by 17% year on year to 17,600.
Management believes that there is a total addressable market (TAM) of US$80 billion that the business can rely on for consistent and steady future growth.
Crowdstrike (NASDAQ: CRWD)
Crowdstrike is a cybersecurity company that delivers endpoint protection using a platform that integrates various cloud modules that include threat identification, managed security services, and identity protection.
The company touts itself as the leader in the industry with a 17.7% market share in a fragmented market.
Crowdstrike reported revenue of US$2.24 billion for FY2023, up 54% year on year, as subscription revenue grew 55% year on year to US$2.11 billion.
Ending annual recurring revenue (ARR) jumped 48% year on year to US$2.56 billion.
The business also reported a record operating cash flow of US$273 million along with its highest-ever free cash flow generated of US$209 million.
Crowdstrike ended FY2023 with 23,019 customers, up 41% year on year.
With a potential TAM of US$158 billion by 2026, the company still has a long runway for further growth.
Datadog (NASDAQ: DDOG)
Datadog operates a SaaS platform that integrates and automates infrastructure and application performance monitoring to provide real-time security for its clients.
Clients use the company’s platform to enable digital transformation and drive cloud migration.
Revenue shot up 63% year on year to US$1.68 billion for 2022 as the business onboarded more customers.
Total customers stood at around 23,200 at end-2022, up 23.4% year on year from 18,800 in 2021.
Meanwhile, customers with ARR of US$1 million hit 317 as of 31 December 2022, an increase of 47% year on year, showcasing how Datadog is signing on larger deals with its customers.
For 2023, Datadog expects revenue at US$2.08 at the midpoint of its guidance, representing a 23.8% year on year increase.
Management believes the TAM will reach US$62 billion by 2026, giving the company ample opportunities to grow its top line.
Asana (NYSE: ASAN)
Asana operates a cloud platform that helps organisations’ teams to organise, track, and manage their workflows.
The company is present in more than 200 countries and territories and counts Amazon (NASDAQ: AMZN) and Japan Airlines (TYO: 9201) as its customers.
For FY2023, revenue climbed 45% year on year to US$547.2 million.
Moreover, the number of customers spending US$100,000 or more on an annualised basis increased 49% year on year to 506.
Asana also enjoyed a healthy dollar-based net retention rate of more than 115% for its FY2023 fourth quarter.
Asana believes that the market remains underserved with around 1.1 billion addressable workers.
The TAM is projected to grow from US$22.6 billion in 2020 to US$50.7 billion by 2025.
In line with the steady growth in the TAM, Asana expects revenue for FY2024 to come in at US$643 million, representing a year-on-year growth of around 17.5%.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
