"We're living in a time of rapid change," is a phrase I hear often in the media these days. I think that's a big understatement.
The coronavirus pandemic has transformed the world and the markets in a little over a month.
Nevertheless, it's tough to imagine anything that would change my strong conviction on Microsoft Corp. (NASDAQ: MSFT).
I've made no secret of the fact that I believe "Mr. Softy" is one of the best plays in a $160 billion cloud computing sector that's grown stronger by the day since 2.5 billion people went under lockdown.
It's not hard to understand the catalyst for that: Governments, institutions, and individuals have little choice but to work and transact business remotely where- and whenever possible. That includes Microsoft itself, by the way.
Cloud computing and storage is absolutely critical for that effort.
So, my Microsoft recommendation stands, of course, but today, I want to look at another long-term buy.
This firm is closely allied with Microsoft - like my dad used to say, "People judge you by the company you keep."
The company I'm about to name is actually integral to Microsoft's own success, so much so that its earnings could double in the next three years...[mmpazkzone name="in-story" network="9794" site="307044" id="137008" type="4"]
This Company Is in Pole Position
This unassuming company I'm about to mention is hardly a household name. In fact, I'd say it's "plain vanilla." But as former Wells Fargo chief Carl Reichardt told me back in the '80s, "if making a lot of money is plain vanilla, color me plain vanilla."
You'll see in a minute why it should be on every investor's radar; it's certainly on Microsoft CEO Satya Nadella's radar.
ServiceNow Inc. (NYSE: NOW) occupies an enviable spot in the $160 billion cloud services segment, part of the wider, $3.5 trillion global information technology (IT) services sector.
It provides services that are vital for keeping modern companies running their backend systems smoothly. Thousands of companies were already moving data and applications to the cloud, but the lightspeed rise of telecommuting means that's only accelerating now.
ServiceNow offers a full-service IT environment that unifies everything from operations and asset management, to security and risk compliance, to developing new apps in house.
Its clients include firms like healthcare giant AstraZeneca Plc. (NYSE: AZN), chip leader Broadcom Inc. (NASDAQ: AVGO), and consumer products titan Kimberly-Clark Corp. (NYSE: KMB), manufacturer of in-demand items like surgical masks, nitrile gloves, and toilet paper - a huge range of personal products.
My dad would approve: ServiceNow keeps very good company. But the biggest and best friend it has is Microsoft.
A Rising Tide Lifts Two Boats
Thanks to recently inked deals between the two companies, ServiceNow practically gets to share in Microsoft's success.
Here's what I mean: ServiceNow has agreed to host all its services on Microsoft's world-beating Azure cloud platform.
In turn, Microsoft is moving ServiceNow up to "key strategic partner" status.
Even better, the Redmond, Wash.-based tech giant is adopting ServiceNow's IT and employee-experience products across the company to improve Microsoft's operations and its employees' workday.
In short, ServiceNow is helping Microsoft's employees focus on their job, not paperwork, turning their company into a more limber tech giant.
Now, ServiceNow's stock price has been a bit of a roller coaster recently. On Oct. 22, the company announced that its then-CEO, John Donahoe, was leaving to run Nike Inc. (NYSE: NKE).
Under Donahoe's leadership, ServiceNow's stock had risen 161%, so traders were, perhaps understandably, worried any replacement at the top would be a downgrade.
Shares fell 15% overnight, but folks in the know spotted that as a favorable entry point.
Sure enough, the new CEO, Bill McDermott, proved his critics wrong... and then some.
From the beginning of his tenure to the Feb. 19 "coronavirus correction," ServiceNow shares rose 54%. Suffice it to say that McDermott has convinced his doubters on Wall Street.
And it's no wonder. Before becoming ServiceNow's CEO, McDermott worked for 17 years at SAP SE (NYSE: SAP), a Germany-based global IT company. In 2010, he became the company's co-CEO, and four years later, the board made him the only one.
As a longtime leader of a $142 billion global company, McDermott knew the kinds of issues that large businesses run into when dealing with IT systems, employee portals, and security. And after 17 years in the industry, he also knew exactly how to run a company like ServiceNow.
Far from a downgrade, he's proven to be the perfect fit. I think that puts ServiceNow is in the pole position to double in price from here.
Conservative Estimate: NOW Doubles in Under Three Years
Look, over the past three years, ServiceNow has grown earnings per share by an average of 68% a year.
For the quarter just past, analysts were betting ServiceNow would come in at $0.84 a share, 55% higher than the same time in 2019. And that was on the low end.
But as I'd suspected, ServiceNow blew those estimates out of the water Wednesday night, with earnings of $1.05 a share, an "upside surprise" of 9.37% and more than 57% over earnings just a year ago.
It's easy to see the path to doubling from here.
As I said, I think we can expect that performance to continue as more and more business is done remotely. With more and more companies moving to the cloud and to remote work, ServiceNow may be seeing an uptick in business.
In other words, this is a great investment for the long haul.
And in the meantime, be sure to check out this one opportunity that touches practically any industry you can think of.
You see, my colleague, Tom Gentile, has been tracking this little-known market for the last 22 months - and I've never seen anything like it.
There are hundreds of these opportunities being traded every day. And absolutely anyone can capitalize on them. So today, Tom's going to blow the lid off this thing - and show you how you can pocket gains like 473%, 631%, even 933%...
Follow Money Morning on Facebook and Twitter.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.