It’s been a long year since the first U.S. case of coronavirus was identified in January. Businesses, schools, and our everyday lives have been disrupted in numerous ways. But despite everything, three tech stocks — Twilio (NYSE:TWLO), DocuSign (NASDAQ:DOCU), and MongoDB (NASDAQ:MDB) — are making investors smile.
This trio has been thriving in the face of the coronavirus and putting up solid market-beating returns this year. Let’s dive into what has made these three boons for investors and see if it makes sense to grab some shares of this tech threesome today.
Twilio: The customer-engagement platform
Twilio’s cloud software platform makes it easy for software developers to hook into a company’s existing software and create automated computer-driven messages for customers. Whether it’s an email notification that you are late on the electric bill, a text letting you know your package was delivered, or a call reminding you of a medical appointment, it’s likely that these communications were powered by Twilio software.
Twilio’s platform has grown to $1.5 billion in trailing-12-month revenue and serves more than 208,000 customers. Most of the company’s revenue comes from a usage-based model (around 76%); as customers enable more messages, Twilio makes more money. Its most recent quarter posted revenue gains of 52%, customer account growth of 21%, and dollar-based net expansion of 137%. It’s not that this company hasn’t been impacted by the coronavirus; it has. Industries such as ridesharing, travel, and hospitality have seen slowdowns, but the healthcare industry and other customers have more than picked up the slack.
The future looks bright for Twilio. In its October investor day presentation, leadership indicated the company could grow organically at a 30%-plus annual revenue rate for each of the next four years. With smart management and its acquisition of customer data platform Segment, this company is well positioned to meet or beat its growth goals.
DocuSign: E-signatures and more
As the pandemic spread, businesses scrambled to set up work-from-home situations and found that their old manual signature processes desperately needed upgrading. In its first six months of this fiscal year (ending July 31, 2020), DocuSign has added more than 24,000 enterprise and commercial customers, an increase of 33% over that time. These large customers now are 99,000 strong, and their monthly subscription-based contracts make up 88% of the company’s top line. This growth has been amazing, but it’s just the beginning.
Through smart acquisitions and a focus on product innovation, the company has developed its Agreement Cloud product suite. This set of software tools enables companies to manage the agreement process from the creation stages through signing and, ultimately, managing a large set of contracts. Companies like Uber have signed on to the Agreement Cloud, giving them tools to manage their massive volumes of contracts and to streamline the creation and signature processes.
As these new corporate customers start to realize the benefits of DocuSign’s time-saving offerings, they will likely be back to see what other agreement processes the e-signature giant can help them automate.
MongoDB: A database for today’s applications
Most databases in use today are built on a 50-year-old architecture that was developed way before mobile phones, the internet, or the cloud. Needless to say, these SQL-based (structured query language) databases aren’t always able to keep up with the 24/7 high-speed and massive scaling demands of modern cloud-based applications. That’s where MongoDB’s document database shines. It was developed specifically for cloud software and is the most popular database of its kind for developers today, as ranked by DB-Engines.
The company has grown to $463 million in trailing-12-month revenue and serves more than 20,200 customers. It has two primary products: its Enterprise Advanced product, which customers install in their own data centers, and Atlas, a cloud-based offering. Atlas is growing at a faster clip (up 66% year over year) and has contributed 44% of the total top line for the company’s most recent quarter, which ended July 31, 2020.
For Q2, revenue grew 39% year over year, and it is expected to hit 38% to 40% growth in the upcoming quarter. MongoDB’s opportunity is huge. IDC projects the database market to be $71 billion this year, growing to $97 billion by 2023. With a tiny 0.7% share, this cloud database provider still has plenty of room to run.
The bottom line for investors
These three tech stocks have thrived during the pandemic because they help companies upgrade and digitize inefficient processes. Even as this health crisis becomes a thing of the past, these valuable tools will still be in high demand, which drives these stocks to premium valuations.
DocuSign carries a lofty 32 price-to-sales (PS) ratio, and the other two stocks come in at a 26 PS ratio. But if you have a long-term mindset, you can confidently buy into shares today. In 5 or 10 years, you’ll be able to look back at 2020 as not just the crazy year of the coronavirus but the time you added these winners to your portfolio.