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The holidays are coming, and it’s time to put gifts in the stockings. As you prepare your Christmas list, you may want to consider the gifts that keep on giving. Investments can gain significant value over time and generate cash flow if they offer dividends.
Stocks can generate long-term returns and offer more options during retirement. You can buy shares for yourself or surprise a friend or family member with extra shares of their favorite companies. Loading the stockings with these three stocks can be a great move for long-term investors.
Arista Networks (ANET)
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Arista Networks (NYSE:ANET) is a cloud internet leader with large data centers. The company’s software helps businesses run more efficiently while staying safe from hackers.
Arista Networks has high earnings growth and a reasonable 35 P/E ratio. In the third quarter, the company reported 28.3% year over year (YAY) increase in income. Net income grew by an even more impressive 54.1% YOY and solidified a 36.1% net profit margin.
In the press release, Arista Networks president and CEO Jayshree Ullal cited continued momentum for the company’s enterprise, cloud and artificial intelligence sectors.
Further, the company projects Q4 revenue of $1.5 billion to $1.55 billion. The high end of the range represents 20% YOY revenue growth. Also, Arista Networks told investors to expect a 63% non-GAAP gross margin.
Although non-GAAP gross margin does not indicate the amount of money a company actually keeps, ANET achieved a 63.1% non-GAAP gross margin in Q3. This translates to a 36.1% net profit margin.
Profit margins look good, and the company still expects double-digit revenue growth YOY. That’s a good combination for any long-term stock.
Supermicro (SMCI)
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Companies looking to expand into artificial intelligence (AI) need Supermicro’s (NASDAQ:SMCI) data centers to make their AI solutions work. It takes a lot of computing power and space to enable AI tools and software.
The company’s servers and storage solutions are among the best in the industry. Also, Supermicro has a partnership with Nvidia (NASDAQ:NVDA), enabling it to gain additional market share.
Supermicro is the lesser known stock between the two AI games. However, it has a low 26 P/E ratio relative to its revenue and earnings growth. The company’s year to date (YTD) performance was right in line with Nvidia. SMCI shares have gained 238% YTD.
Finally, the stock has comfortably outperformed Nvidia’s gains over the past five years. SMCI is up an incredible 1,929% during that time frame. In addition, increasing demand for edge computing and 5G will benefit the company. It’s not just an AI play.
Serve Now (NOW)
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lastly, Serve Now (NYSE:NOW) outperformed the market by a wide margin. Shares have gained 70% YTD and are up 306% over the past five years.
The company has a vast network of 7,700 global enterprise customers, including 1,789 that have annual contract values that exceed $1 million. And, 49 customers have annual contract values above $20 million. That’s a lot of recurring revenue, and the company’s 98% renewal rate suggests that the majority of that revenue is recurring.
This solid baseline explains the reason the company exceeded revenue and earnings guidance while raising its guidance for the rest of the year. Revenue grew 25% YOY while expanding clients with $1 million and $20 million annual contract values.
Additionally, rising net income contributed to the stock’s gains. The company’s net income more than tripled in the third quarter, resulting in a 10.6% net profit margin. In fact, NUN’s profit margins have grown in recent quarters.
ServiceNow has a range of products that help businesses increase efficiency, penetrate the cloud and improve their cyber security. The company continues to attract more customers at higher annual contract values. That trend can lead to more gains for long-term investors.
As of this publication date, Marc Guberti has held long positions in ANET and SMCI. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.
Marc Guberti is a financial freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the US News & World Report, Benzinga, and Joy Wallet.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.