In This Article:
Investors have been rattled by the recent stock market slide, but for much of 2018 they were cheering. Stocks moved steadily higher over the first nine months of the year, propelled by low unemployment, strong consumer spending, and the corporate tax cut, with The S&P 500 hitting an all-time closing high on Sept. 20 at 2,930 and the Nasdaq up more than 16% at one point.
While all major indexes finished in the red for the year and stocks generally pulled back in the fourth quarter, there were still a number of big winners that were able to book enough gains in the early part of the year to finish 2018 up more than double from a year ago.
Three of these stocks, The Trade Desk (NASDAQ: TTD), Okta (NASDAQ: OKTA), and Etsy (NASDAQ: ETSY), look poised for further gains. Let's take a closer look at what to expect from this bunch below.
Image source: Getty Images.
The online advertising champ
Few companies delivered the combination of growth and profitability that The Trade Desk did in 2018. With revenue up 54% through the first three quarters to $316.8 million and non-GAAP net income surging 58% to $72.7 million, equaling a profit margin of 23%, it's easy to see why Trade Desk stock jumped 154% last year.
That growth opportunity should continue, as the digital ad market is exploding -- it likely topped $100 billion globally in 2018 after increasing 21% in 2017 to $88 billion. The Trade Desk helps companies with programmatic advertising using a cloud-based platform that allows ad buyers to create, manage, and optimize data-driven ad campaigns, and is a leader in its industry.
The Trade Desk's clients are mostly large advertising agencies, and as digital advertising takes over traditional forms of advertising like print, TV, and outdoor that are less efficient and data-driven, the company should continue to put up strong growth. At a reasonable forward P/E ratio of 42, the stock could have more growth ahead of it this year, especially if the consumer economy remains strong and it benefits from Amazon's big push into advertising.
Another fast-growing cloud company
Another big winner last year was Okta, a leading provider of cloud-based identity and security tools. Okta helps enterprises protect websites, databases, and other proprietary information with tools like password protection and two-factor authentication, and its adaptable cloud service allows a range of companies to customize its software for their own needs.
As a neutral platform, Okta has attracted a wide range of customers and found strong growth last year, consistently topping its own estimates. Revenue through the first three quarters of the year is up 58% to $283.8 million, and the company is taking steps toward profitability, reaching positive free cash flow in the third quarter. Okta has moderated sales and marketing expenses recently, which helped narrow its operating loss from $34.5 million to $28.5 million despite much higher revenue. On a non-GAAP basis, its net loss narrowed from $17.9 million to $3.9 million.