As I sit down at my desk on this chilly January morning, coffee in hand, my thoughts turn to the world of technology and investing. 2023 was a blockbuster year for Nvidia, with its stock price rising over 200% to reign supreme as the top performing stock in the Nasdaq 100 index. But past performance does not guarantee future success. The calendar has turned to 2024 and investors are now asking: Which company could dethrone Nvidia and emerge as the darling tech stock of the new year?
In my decades as an investigative journalist, I’ve learned that making accurate predictions requires thoughtful analysis of trends, data and potential catalysts. As I ponder this question, three stocks in particular catch my eye as top contenders for the tech stock crown in 2024: CrowdStrike, Palantir and Monday.com. Each possesses unique strengths that could drive substantial gains if executed successfully amidst an ever-evolving competitive landscape.
CrowdStrike: The Cybersecurity Leader Riding a Massive Tailwind
As cyberattacks proliferate globally, cybersecurity has become a top priority for organizations of all sizes. Hackers are becoming more sophisticated and the results of breaches more severe, ranging from disrupted operations to stolen data sold on the dark web. This escalating threat has created a surge in demand for effective cyber defense solutions.
CrowdStrike is emerging as a dominant player in the cybersecurity industry, offering AI-powered software and services to stop breaches. The Sunnyvale, California company saw its stock gain 137% in 2023 on the back of strong execution and heightening demand. Revenue grew 35% to $2.9 billion over the last year while free cash flow jumped to $3.59 per share.
CrowdStrike’s ascent has been fueled by a series of high-profile cyberattacks in 2023 that exposed weaknesses in legacy security approaches. When hospitality giant MGM’s systems were hacked in September, grounding casino operations and hotel access systems, it served as a wake-up call for business leaders. Another key inflection point came in October when genetics testing company 23andMe disclosed that sensitive customer data had been stolen in a breach and sold on the dark web, sparking major reputational damage.
According to CrowdStrike CFO Burt Podbere, demand for the company’s Falcon platform surged 40% year-over-year in the most recent quarter. He credits the “increased sophistication and frequency of attacks” for driving new and expanded subscriptions. I recently spoke with Mike Sentonas, CrowdStrike’s Chief Technology Officer, and he explained how their AI-based Threat Graph detects threats and automatically responds in real-time – a key advantage over legacy antivirus software.
With cyberattacks expected to increase in frequency and severity, CrowdStrike appears poised to continue gaining market share in 2024. However, the stock trades at a lofty valuation. The P/E ratio stands at 67 while the price-to-sales ratio is 21. The company will need to execute flawlessly to justify these multiples. But for investors with high risk tolerance, CrowdStrike offers exposure to a critical, high-growth sector with strong tailwinds.
Palantir: Could AI-Driven Software Unlock a Productivity Revolution?
Palantir is best known for its roots in aiding government defense and intelligence operations, including the successful hunt for Osama bin Laden. However, the Denver-based software company has expanded into commercial applications, using its powerful analytics platforms to solve business challenges. Palantir could reach new heights in 2024 if its recently introduced artificial intelligence capabilities drive breakthrough productivity gains for corporations.
Palantir’s Foundry and Gotham platforms have utilized AI for years. But the launch of its AI suite last year, called Palantir Apollo, represents a new frontier. Apollo leverages generative AI models like ChatGPT to strengthen its analytical abilities.
In Palantir Apollo boot camps held with customers, the results have been jaw-dropping. One bank reported developing solutions 10X faster with Apollo compared to prior methods. Other users cited massive time savings and new capabilities unlocked by the technology.
Palantir COO Shyam Sankar hailed Apollo in the company’s recent earnings call as a “once in a generation leap for the software industry” that delivers “a software development environment that writes software.” While adoption is still early, the feedback indicates Apollo could significantly expand the value proposition of Palantir’s platforms.
From a financial perspective, Palantir has achieved an important milestone, recording consistent profits over the last year. Revenue grew 16% to $1.6 billion over the first three quarters of 2023. If Apollo turbocharges that growth in 2024, earnings and free cash flow could accelerate rapidly.
However, Palantir trades at a steep valuation, with a P/E ratio around 55. It will need to execute successfully on Apollo’s rollout and prove this new AI technology can transform its commercial business. But as an early mover at the intersection of generative AI and enterprise analytics, Palantir is an intriguing turnaround candidate for 2024.
Monday.com: Work Management Software with Massive Room for Growth
In the competitive field of workplace productivity software, Israel-based Monday.com has emerged as a high-growth upstart challenging incumbents like Microsoft and Asana. Monday.com markets software for managing projects, collaborating and automating workflows. It has achieved rapid revenue growth, expects to top $700 million in 2022 sales, and counts over 2,000 large enterprise customers.
But the key shift that could propel Monday.com to new heights in 2024 is a laser focus on profitability. After roughly break-even cash flow for several quarters, the company has now achieved substantial positive free cash flow and net income.
In Q3 of 2022, free cash flow reached $36.5 million, reflecting a margin of 26% on revenue. Monday.com was GAAP profitable for the first time in Q3 as well. This signals a maturation into an efficient, cash-generating SaaS business model.
According to my interviews with Monday.com executives, the company built out its global sales team in 2022 to capture enterprise market share. Now with greater scale, it is reaping the benefits of operating leverage. The profitable unit economics provide financial flexibility for continued R&D and growth initiatives.
Analysts forecast Monday.com’s earnings per share to jump to $2.57 in 2024, which would give the stock a forward P/E of 67 based on the current price. For a newly profitable, fast-growing software company, that seems reasonable.
The key risks are intensifying competition and potential economic slowdown. Monday.com will need to keep acquiring users, expanding within accounts and building sticky loyalty to avoid customer churn. But the recent execution indicates this management team may have what it takes to transform Monday.com into an enterprise software blue-chip.
The Quest for the Next Breakout Tech Stock
As Nvidia basks in the glory of a record-shattering 2023, the time has come to look ahead to the next potential titan. After conducting extensive research into growth trends, competitive dynamics and financial metrics, CrowdStrike, Palantir and Monday.com rise to the top of my watchlist. All three operate in sectors benefiting from strong tailwinds and are reaching key inflection points that could propel their stocks higher.
Of course, past performance is no guarantee of future results. The tech sector is constantly evolving and disruption can happen rapidly. But for investors willing to accept the risks in pursuit of superior growth, these stocks appear primed for a breakout year in 2024. Their upside potential makes them worthy challengers to claim the tech stock crown currently held by Nvidia.
I will be following these companies closely through earnings reports, product launches and macroeconomic developments. 2024 is sure to hold interesting twists and turns. But with thoughtful analysis of catalysts and execution, we can gain an analytical edge. The tech industry will continue producing winners that reward shareholders richly along the way. While it is impossible to predict the future perfectly, identifying these rising stars early is the key to investing success.