The correction phase that sent technology stocks lower for the past four weeks appears to be coming to an end.
There could be bumps in the road, including a test of last week’s low, but unless there is a sizeable change in the narrative, I’m looking for the Nasdaq to test the record high by mid-October. Digital transformation stocks should be in the middle of the action.
Today, I want to focus on two digital transformation leaders.
The first is Salesforce.Com, Inc. (NYSE: CRM, Rated “C+”). I have written often about this San Francisco, Calif-based company. It is in the business of digitizing customer relationships. For many businesses looking to transform their business model with data, Salesforce is the starting point.
Salesforce brings sales and marketing data into one cloud-based software platform. And the company has carefully crafted a living ecosystem of third-party developers to ensure a steady stream of industry specific applications for everything from children’s clothing to professional sports stadium management.
Salesforce built applications that brought many Fortune 500 corporations to the platform. As the ecosystem matured and became larger, Salesforce became integral to the way corporations, governments and non-profits reached out to customers.
The San Francisco company is the largest customer relationship management software company in the world. They have 150,000 customers, and over 75% of Fortune 500 businesses use their software.
Its client list is a who’s who of the corporate world, from Adidas and Best Buy Co., Inc. (NYSE: BBY, Rated “B-”) to Zurich Insurance Group AG (OTCPK: ZFSVF, Rated “C”).
Related post: Salesforce Presses Forward with Pandemic Products
After a decline from the $280 level in early September, shares have consolidated gains and are trading near $252. This could be a great opportunity for investors as they appear ready to move toward new highs.
The next digital transformation leader I want to highlight is Workday, Inc. (Nasdaq: WDAY, Rated “D”). The Pleasanton, Calif.-based company is another fast-growing software platform that makes the preferred financial and human resources tools for the enterprise world.
As with Salesforce, the story of Workday is about digital transformation and cutting costs for companies making the jump to its tools. Its mission is to help companies avoid disruption from more nimble competitors.
In the current era, that skillset is golden.
Corporate managers no longer talk about if they will move workflows to the cloud. The question now is when. They no longer default to growing the business by expanding headcount. They want to get smaller, nimbler, so they are not disrupted by motivated twentysomethings with a fresh idea.
Related post: DocuSign Puts Its Signature on the New Workplace
Workday software allows managers to see the entire workforce and free-up capacity. Managers often find they can move resources from collecting and reconciling data, to analytics and planning for future growth.
For many chief technology and chief financial officers, Workday is a no-brainer. This is especially true now that so many firms are working out how to account for employees working from home.
Shares shot up 12% to $250 in late August when the company reported earnings and revenues well above previous guidance. It then retreated to $200 during the recent Nasdaq correction before regaining some ground to trade near $223 recently.
That’s not where they’ll stop, though. Workday shares are ready to continue to rally to new highs and beyond.
Investors would be wise to buy into weakness.
Best wishes,
Jon D. Markman
