2 Magnificent Growth Stocks With “No Downside” to Buy Now, According to Wall Street

Currently, of a group of 37 Wall Street analysts who follow CrowdStrike Holdings (CRWD -7.81%) the lowest price target among them is $193 per share, which implies 25% upside from the current price. Similarly, within in a group of 42 Wall Street analysts who follow Microsoft (MSFT -3.54%), the lowest price target is $255 per share, which implies nearly 13% upside from the current price.

In both cases, Wall Street analysts are effectively saying there is no downside for shareholders. Of course, there is always downside risk when investing in the stock market, and analyst price targets can change at a moment’s notice. But the high level of bullish sentiment surrounding these growth stocks is still noteworthy.

Here’s why investors should consider buying a few shares of CrowdStrike and Microsoft.

CrowdStrike: The gold standard in cybersecurity threat detection

The bull case for CrowdStrike is straightforward: Its cybersecurity software addresses a broad range of use cases, from endpoint and cloud security to identity protection and managed services, allowing customers to consolidate spend on a single platform. Better yet, CrowdStrike is the market leader in several end markets, allowing it to collect data on an unmatched scale. That makes its artificial intelligence engine uniquely effective in detecting threats, according to management.

CrowdStrike also has another key advantage. Its platform comprises 22 software modules, but all of them are delivered through a single software agent that can be installed without a system reboot. That unique quality means customers can deploy products without costly downtime, and that has fueled rapid growth.

Over the past year, revenue skyrocketed 61% to $1.8 billion and free cash flow soared 49% to $543 million. What’s more, CrowdStrike surpassed a $2 billion revenue run rate in the most recent quarter, making it the second-fastest software company in history to hit that mark, and investors have good reason to believe that momentum will continue. CrowdStrike puts its addressable market at $58 billion in 2022, but management believes its product pipeline could push that figure to $126 billion by 2025.

Building on that idea, CrowdStrike recently debuted a new log management module, Falcon LogScale. Log management refers to the continuous collection and analysis of data from across disparate systems. That technology helps security teams identify and remediate threats, but it also helps operations teams ensure that applications and infrastructure remain healthy. In short, Falcon LogScale extends CrowdStrike’s purview beyond cybersecurity, into application performance monitoring and observability. That type of innovation should keep the company growing like wildfire.

Currently, shares trade at 19.1 times sales, a discount to the three-year average of 36.5 times sales. That’s why this growth stock is worth buying today. However, investors should keep in mind that every stock has downside risk, even if Wall Street’s price targets imply otherwise.

Microsoft: The cornerstone of business productivity

The bull case for Microsoft is straightforward: The company possesses the type of brand authority that few businesses ever achieve, and its indispensable software products and cloud services have seen adoption by hundreds of thousands of businesses around the world. Moreover, many of those products should only become more relevant as businesses continue to invest in digital transformation.

Most notably, Office 365 is the gold standard in office productivity software, but other products in Microsoft’s arsenal have also been recognized as industry-leading solutions. That includes Dynamics 365 for enterprise resource planning, Teams for communications, and Power BI for business analytics. Industry analysts have also recognized Microsoft as a leader in several cybersecurity verticals, including security information and event management, extended detection and response, and access management.

Additionally, Microsoft Azure is gaining market share in cloud computing. It captured 22% of cloud infrastructure spend in the most recent quarter, up from 21% last year, according to Canalys. That puts Azure firmly in second place behind Amazon Web Services. Microsoft’s success in cloud computing stems for its expertise in developer tools and machine learning. In fact, Azure Machine Learning — a service that helps clients build artificial intelligence models — has increased revenue more than 100% for four consecutive quarters.

That said, Microsoft has struggled with macroeconomic headwinds of late. High inflation has suppressed business and consumer spending, and unfavorable foreign exchange rates have chewed into growth. But the company still churned out respectable financial results over the past year, as revenue rose 15% to $203 billion and free cash flow climbed 5% to $63 billion.

Looking ahead, investors have good reason to be bullish. Grand View Research says the cloud computing market will grow at 16% annually to reach $1.6 trillion by the end of the decade, while the cybersecurity market will grow at 12% annually to reach $500 billion over the same time period. Additionally, Microsoft is positioning itself to be a big player in online video advertising — a market set to reach $362 billion by 2027 — through its partnership with Netflix. In short, despite a market cap of $1.7 trillion, Microsoft still has room to grow.

With that in mind, shares currently trade at 24.3 times earnings, a bargain compared to the three-year average of 32.2 times earnings. That creates an attractive buying opportunity, though investors should remember there is always downside risk.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon and CrowdStrike Holdings, Inc. The Motley Fool has positions in and recommends Amazon, CrowdStrike Holdings, Inc., Microsoft, and Netflix. The Motley Fool has a disclosure policy.

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