- Brent Bracelin covers business-focused cloud-computing companies, and according to TipRanks, he’s the most accurate analyst on Wall Street.
- Many of the companies Bracelin covers have made enormous gains and far surpassed his price targets in the past few months.
- He told Business Insider about six “franchise” companies he recommends to long-term investors because they have great potential even if they look expensive right now.
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Brent Bracelin has watched the cloud-computing companies he covers go sky-high this year.
Bracelin is a senior research analyst at Piper Sandler. As of early June, he was the most accurate analyst on Wall Street, according to the rating database TipRanks.
One big reason for that is that in February and March, businesses had a rude awakening about how critical remote work and cloud computing really were.
Bracelin’s companies are all business-focused rather than consumer-focused, and he said many of them jumped 100% in value in just a couple of months. That’s brought them to a precarious position. And even though Bracelin thinks the next year might be uneven for those companies, he’s very enthusiastic about how much more business they’re going to win after that.
“Over the last decade, we’ve gone from 1% to 10% penetration of cloud or digital in enterprise,” he told Business Insider in an exclusive interview. “By 2030, we think that that market could go to 50% penetration.”
That might make for some difficult calls for a short-term investor. But for someone thinking about investing for five or 10 years, Bracelin’s advice is pretty simple: Buy these six stocks when they dip. It doesn’t matter that as of Wednesday all six were trading above his price targets, some by huge amounts.
“These have the biggest opportunities, large addressable markets, differentiated technology with competitive moats,” he said. “They all have a longer-term potential to be multibillion-dollar businesses and sustain high growth for the next decade.”
If that’s too complicated, he said you could always keep it simple and invest in Microsoft.
“Microsoft is probably one of the best-positioned companies to capitalize on this whole shift to cloud and AI,” he said. “Their cloud business is north of a $50 billion run rate today. We think it could double.”
But for investors who are looking for newer and potentially less familiar companies to invest in, Bracelin said these were his “franchise names.”
(1) MongoDB
MongoDB stock has climbed almost 80% this year, and that’s one of the smaller gains on this list. Bracelin said it could become the dominant company in its industry.
“MongoDB is the first database company to come public in 20 years,” he said. “They’re addressing a $55 billion database software market and have less than 2% penetration, so it’s an untapped opportunity essentially to become the next Oracle of the space.”
(2) Shopify
Shopify is up 156% this year and left Bracelin’s target of $843 a share in the dust in June. On Wednesday it joined an exclusive club of US stocks worth $1,000 per share or more.
Bracelin said there were huge numbers of businesses, including mom-and-pop shops and the 150-year-old Heinz, that would pay for Shopify’s e-commerce platform services.
“It’s a business that could be a $10 billion, $12 billion kind of business (revenuewise),” he said. That would represent growth of more than 500% from its 2019 total of $1.6 billion.
(3) Twilio
Twilio has more than doubled in value this year, and Bracelin said big companies were flocking to it so they could do a better job of connecting with their customers.
“Twilio is a business that we think could expand to $5 billion, $8 billion in revenue over the next five years,” he said. That’s up from $1.1 billion last year.
(4) Bill.com
Most small businesses still write checks, Bracelin said, and that means there’s a gigantic market for Bill.com‘s automation services. That helps explain why the stock has rallied 143% in 2020.
“They’re automating that whole back-end process for a small business and also layering in the ability to do digital payments,” he said.
(5) Veeva Systems
Veeva Systems is up 72% this year, and Bracelin praised the company’s services as well as its high profit margins and growth potential.
“They just, in the last five years, not only kind of automated and modernized the front office for life-sciences companies, but now they’re automating the back office as well,” he said.
(6) Coupa Software
Coupa stock has soared 96% so far this year. Bracelin said that like a few other companies on this list, its products are strong enough that they’re starting to overcome businesses’ reluctance to change their conservative spending habits.
“They’re automating the procurement process for a large enterprise,” he said. “Bill.com is automating the back office for a small business. I think of Coupa as automating the back office for a large enterprise.”
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