Today we have not one but two promising growth stocks for you to look at. Each is worthy of your attention for their own merits. And while you might recognize the first, the second is a sleeper stock you may never have heard of.
Let's get started...
Microsoft recently unveiled its financial outcome for the second quarter of fiscal 2023, ending December 31, which displayed lackluster performance. The firm registered a slight 2% growth in its revenue, reaching $52.7 billion, a significant slowdown from the 20% surge seen during the equivalent period the prior year. In addition, GAAP earnings witnessed an 11% decrease to $2.30 per share.
Unfortunately, the short-term forecast seems dismal, with a mere 3% revenue increase projected for the upcoming third quarter, primarily due to unfavorable foreign exchange rates and challenging macroeconomic conditions.
However, for investors with a long-term view, there's a silver lining...
Microsoft's shares have seen a steeper fall in the current bear market than any other period over the past decade, primarily due to transient economic hurdles. Yet, given Microsoft's broad spectrum of essential software offerings and cloud solutions serving countless businesses, the firm is well-positioned to bounce back and realize rapid growth once the economy gets back on track.
According to research firm G2, Microsoft claimed the title of the world's best software company last year, a feat accomplished through high user satisfaction scores and dominant positions across various software sectors. Microsoft 365 is renowned as the gold standard in office productivity software, while G2 analysts also acknowledge the company's leadership in enterprise resources planning and cybersecurity, with both industries projected to see double-digit CAGRs until the end of the decade, as reported by Grand View Research.
Meanwhile, Microsoft Azure has made notable strides in the domain of cloud computing. With a 2 percentage point increment over the past year, it now represents 23% of the total spending on cloud infrastructure and platform services (CIPS), firmly establishing itself as the second-largest CIPS vendor by a considerable gap. This accomplishment sets the stage for Microsoft's substantial expansion in the forthcoming years, as expenditure on cloud computing is anticipated to surge by an average of 16% annually, culminating in $1.6 trillion by 2030.
Furthermore, Microsoft has quietly risen to be the seventh-largest digital ad publisher globally, and its alliance with Netflix is anticipated to boost its footprint in the online video advertising landscape. This sector is projected to grow at an average rate of 14% annually, reaching a staggering $362 billion by 2027.
On top of its strong software and cloud services offerings, Microsoft is also a pioneer in artificial intelligence advancements. A prime example is its GPT-driven virtual assistant, ChatGPT, which has the potential to transform how users engage with Microsoft's products and services, providing a more tailored and efficient experience.
Additionally, with the anticipated launch of a ChatGPT-powered version of Bing, Microsoft is poised to significantly elevate the search engine experience for users. This integration could potentially alter market dynamics, offering users an AI-enhanced search experience. If Bing manages to secure a substantial market share through AI adoption, Microsoft's growth prospects could substantially improve.
Overall, Microsoft's substantial commitments to AI innovations, combined with its strong suite of software and cloud solutions, lay the groundwork for future expansion. The corporation is well-situated to maintain a steady escalation in revenues at a double-digit percentage over the next few years, making its current sales multiple of 9.4 appear justifiable.
As a result, investors should seize this distinctive investment prospect.
The Perion Network, an adtech firm based in Israel, is renowned for its intelligent hub that optimizes ad campaigns by linking ad buyers and sellers.
Despite the tough times in the digital advertising industry, Perion has consistently reported robust results. The fourth-quarter revenue saw a 30% leap to $205 million, and the adjusted EBITDA rose by 63% to $47 million, resulting in an EBITDA margin of 23%.
Perion has achieved strong growth in both revenues and profits by scaling up its intelligent hub, offering high-quality ad experiences on Connected TV and other channels, and through unique ad products such as the "connected cart," allowing viewers to purchase directly from a Connected TV ad using a QR code.
Perion also features its own cookie-less technology, SORT, which aids in cultivating customer loyalty as advertisers seek alternatives to third-party cookies that Google is soon phasing out.
Perion's partnership with Microsoft and its status as a preferred partner for Bing search engine could provide significant growth potential, especially with the expected launch of a ChatGPT-powered version of Bing. If Bing manages to secure a substantial market share, Perion stands to benefit greatly.
Lastly, the stock is attractively priced at less than 12-times adjusted EBITDA, a fantastic value for a rapidly growing stock like Perion's.
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