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Editor's note: This column is part of our
Best Stocks for 2016
contest. Jon Markman's pick for the contest is
For the past couple of years, I've been telling anyone who
will listen that the Internet of Things (IOT) is the next great
technological breakthrough. A revolution that will have an impact
on every aspect of our lives.
Spoiler alert: I expect that
) stock will be an excellent way to play this trend.
Our automobiles, fridges, toasters, lamps, stereos, TVs,
lights and commercial buildings all sharing a single network. All
communicating with each other to make life easier. This isn't
some utopian dream that perpetually exists in the not too distant
future - it's here now.
Imagine on your way home from work, your car alerts your
garage door to open as soon as you enter your neighborhood. Your
home alarm is disengaged. It also turns on your lamp and adjusts
your temperature controls. It automatically fills your hot tub
and tunes your stereo to your favorite Spotify playlist…
The technology to achieve this is already here. And that's
just a peek into one of the areas of life that is undergoing a
radical change. Transportation, retail, television media, gaming,
payment processing, healthcare, industrial manufacturing, news
gathering - you name it, as nearly every segment of our world is
experiencing this shift in how we interact with technology.
There are many ways to profit from this new world, but like I
mentioned in the
, the true value in this space lies not with hardware tech, but
with the services layered on top that allow us to better interact
with this new always-online world.
That's where Globant stock enters in. It's the young $1
billion technology services and brand development provider that
bridges the gap between the technology and the user experience.
This new and emerging technology has been moving too quickly for
most businesses to keep up with and for many of them, Globant is
The firm believes that as companies attempt to adapt their
business models to benefit from these emerging technologies, they
will seek solutions that meet the engineering requirements but
that also engage the end user in new and powerful ways. In other
words, keeping up with the latest technological breakthroughs
while also deepening brand loyalty with users.
Since I last visited Globant and made GLOB stock my
Best Stocks for 2016
pick, the firm has reported fourth quarter results that once
again exceeded expectations on all fronts. Revenues of $71.6
million represented a 29.8% jump from a year ago and were well
ahead of the $68.7 million that analysts expected.
Additionally, Globant chief executive and co-founder Martin
Migoya guided 2016 full year revenue and earnings growth ahead of
The Globant stock price has taken nearly a 20%
haircut since the beginning of the year, but much of that is just
due a crease of sentiment. After rising over 140% in 2015, the
tech services company's shares weren't cheap by most standards,
and the rough start for tech and small companies at the start of
2016 didn't help.
A deeper look however reveals that GLOB is currently trading
at 22 times forward earnings, which is below many of its peers.
Annual revenue as well as the average revenue per client is
accelerating, and for the first time the company now has over 50
separate clients with revenues of $1 million or more.
Now a bit of the bad news. While gross profit jumped 20.7%
this past year, it was at a slightly slower pace than overall
revenues due to the significant Argentine peso depreciation in
Also, one of the exciting things the firm is currently working
on is its partnership with
) on a modular smartphone, dubbed Project Ara. The idea is to
provide a highly customizable phone where various modules such as
the display, camera, battery, etc are all interchangeable. Recent
delays in the initial prototype have also placed a bit of a
damper on GLOB stock despite it having no significant impact on
the company's overall expected revenues for the next couple of
Globant, however remains one of the best in the segment in
growing client revenues the longer they are with the firm. The
typical customer engagement grows from an average of $500k in
revenues and a handful of services offered in year one to
revenues of $5 million and GLOB professionals deployed across
several areas of the client's company by the third year.
That represents phenomenal client expansion and integration
that few companies in any industry can claim.
GLOB is still growing at an accelerated pace and presents one
of the few pure plays on the many breakthroughs happening in the
emerging technologies surrounding the IOT.
The recent pullback in Globant shares should be an excellent
opportunity to take advantage of one of the most exciting but
well-grounded companies in all of tech.
Jon Markman writes a daily trading newsletter,
, a service geared towards helping individual traders make
steady, consistent profits with the VIX.
him on Twitter
for his latest take on markets and innovation.
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