Cloud Hosting

Shares of Datadog (NASDAQ:DDOG), MercadoLibre (NASDAQ:MELI), and Cloudflare (NYSE:NET) have more than doubled in 2020. These stocks have seen more opportunities than challenges in the coronavirus health crisis. They are also poised to continue growing for years to come because the COVID-19 pandemic may have accelerated their growth plans but the good times should keep rolling when the world goes back to normal operations again.

Datadog helps other companies monitor their cloud computing services through a variety of data collection and analysis tools. These tools are, of course, presented as cloud-based services themselves. This is software-as-a-service designed to monitor the performance, security, and efficiency of your software-as-a-service solutions.

The work-from-home policies of the COVID-19 pandemic were tailor-made to boost Datadog's business prospects. The stock has gained 123% year to date.

Top-line sales rose 68% year over year in the second quarter, exceeding both analyst estimates and management's guidance targets. The list of customers with contracts worth at least $100,000 per year grew 71% longer and existing clients renewed their deals at an average of 30% above the expiring arrangement's dollar value.

Image source: Getty Images.

Datadog expects the new customers to stick around for the long haul because the service monitoring platform tends to become essential to the client's day-to-day operations very quickly.

"We had a few small yet notable new logo wins from two global hotel chains, an amusement park chain, a large U.S. university, and a European airline," CEO Olivier Pomel said in the second-quarter earnings call. "These wins show that even in the face of challenging times for these customers, transforming to ensure business resilience and longevity is a top priority."

The bottom line often looks skimpy, including second-quarter earnings of just $0.05 per share, but that's not what this company is about. Datadog is a classic growth stock, funneling every ounce of available cash into promoting even faster revenue growth rather than adding it to a growing pile of retained earnings. It's a winning business model, with or without artificial tailwinds from a global pandemic.

MercadoLibre started out as the eBay (NASDAQ:EBAY) of Latin America and the Caribbean. That's still true but the company has also branched out into a number of related fields such as digital payment services (Mercado Pago and Mercado Credito), shipping and logistics (Mercado Envios), and e-commerce storefront platforms (Mercado Shops).

The safer-at-home policies of the COVID-19 pandemic were tailor-made to boost MercadoLibre's business prospects. The stock has gained 112% year to date.

Sales were not just growing but accelerating over time when the pandemic came along. The growth curve only turned more sharply upward in the spring and summer of 2020:

MELI Revenue (TTM) data by YCharts

People turning to online shopping instead of going to the local tiendas and supermercados drove MercadoLibre's revenues 61% higher in the second quarter while operating expenses only increased by 15%. You don't have to do a whole lot of advertising to keep the customers coming to an e-commerce portal in times like these. The road ahead involves helping Latin America as a whole get back on track.

"At MercadoLibre, our stated business mission is to democratize commerce and payments," CFO Pedro Arnt said in the second-quarter earnings call. "With so many businesses being hard hit, we have the unique opportunity to connect and empower millions of Latin American entrepreneurs, while continuing to partner with governments across the region in our role as an essential service. Never has our mission been more relevant and never have we felt more determined to fulfill it."

That's a strategy I can get behind, and it should serve MercadoLibre and its investors well in the years to come.

Image source: Getty Images.

This company runs a global network of digital content delivery servers, distributed-denial-of-service (DDoS) mitigation hubs, and Internet security tools. Clients both large and small depend on Cloudflare to keep their online services available and snappy to users around the world, even while under attack from a DDoS botnet.

(Stop me if you've heard this before!)

The work-from-home policies of the COVID-19 pandemic were tailor-made to boost Cloudflare's business prospects. The stock has gained 123% year to date.

Cloudflare's second-quarter sales rose 48% year over year. The number of large clients increased by 65% and the list of paying customers lengthened by 8% compared to the previous quarter. Meanwhile, Cloudflare continued to protect its client during one of the busiest periods of online attacks in the history of global networking.

"May was the busiest month the Internet has ever seen for DDoS attacks," CEO Matt Prince said on the earnings call. "June saw an attack against one of our customers that lasted 4 days and peaked at more than 750 million packets per second. Our network didn't flinch. The targeted customer's infrastructure never slowed down, and they weren't even aware until our systems alerted them."

That's the best possible outcome from attacks like these, and Cloudflare has delivered many similar success stories in 2020. Keeping cloud-based services available and fully functional at all times has become an essential business requirement for many companies, including some that never thought of the internet as a business asset before the coronavirus pandemic rolled in.

Cloudflare's proven expertise in protecting cloud-based business services will make a lasting impression on clients who signed on in the rapidly changing networking environment of 2020. This is another high-performing growth stock for the ages.

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3 Stocks That Have Doubled In 2020 and Still Have Room to Grow - Motley Fool