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Best Stocks of 2016: Globant SA (GLOB) Emerges as Digital Transformation Leader

The Internet of Things should be a boon for GLOB stock

By Jon Markman, Editor, Trader's Advantage and CounterPoint Options

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Editor’s Note: This article is part of our Best Stocks for 2016 contest. Jon Markman’s pick for the contest is Globant SA (NYSE:GLOB)

Software is changing the face of commerce and the small, nimble companies using new technologies to shape user experiences are reaping the rewards. That’s the story of Globant SA (NYSE:GLOB), my pick for Best Stocks for 2016.

Best Stocks of 2016: Globant SA (GLOB) Emerges as Digital Transformation LeaderYou wouldn’t expect a small creative company based in Buenos Aires would be so sought after, yet Cisco Systems, Inc. (NASDAQ:CSCO), The Coca-Cola Co (NYSE:KO), Electronic Arts Inc. (NASDAQ:EA), Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), Southwest Airlines Co (NYSE:LUV) and other large international companies have put their trust in Globant to deliver innovative, nimble user experiences to customers all over the world.

Yet dig a little into the story and it makes more sense. With operations in eight countries, GLOB stock has its finger on the pulse of emerging social trends and the engineering prowess to integrate contextually aware, personalized experiences using Big Data and the Internet of Things.

It’s where commerce is going and Globant has become the clear leader.

Globant Looking Great

Globant got its start in 2003, when it was founded by current chief executive Martin Migoya and three friends. The small startup’s initial goal was to create software products, initially in Latin America. Less than five years later however, the company had already grown into a multimillion dollar, multinational corporation with clients all over the world.

Growth has been impressive. In 2010 the company had sales of just $57 million. By 2015, revenues were $253.8 million … and there is no sign of slowdown.

In August, GLOB stock reported second-quarter sales of $79.9 million, representing year-over-year growth of 31.9%. It guided analysts to expect $80 million to $82 million in sales for the third quarter. In a letter to shareholders, Martín Migoya, Globant’s chief executive and co-founder said:

“The market continues to rely on the growth of digital services’ demand, where we maintain our positioning as leader. This can be seen in a recent IDC MarketScape report, which recognized us as a worldwide leader of digital strategy consulting services.”

That is a good place to invest because IDC expects the worldwide market for digital strategy consulting will mushroom to $97 billion by 2019.

Better still, Globant is well-positioned in the fastest-growing part of the business. Digital related spend should increase from about 50% of all IT and business related spending to 80% as companies move briskly to the digital age where outcomes are measurable. For spendthrift business managers that is a big deal.

Michael Versace, research director at IDC makes the case:

“As digitization alters the nature of business, competition, supply and servicing operations, a growing number of organizations of all sizes and maturities will adopt elements of a digital strategy to create and/or maintain a brand, product, and operational advantage. As more firms adopt digital strategies, consulting engagements must contain a larger digital strategy services capability.”

GLOB stock’s growth strategy is an easy sell, and that’s before we’ve even expounded on its place within the Internet of Things — perhaps you’ve heard of that global phenomenon that is rapidly altering nearly every aspect of how everyday life gets done? From the complexities of driverless automobiles to the simplicities of having your living room lamp turn itself off when you leave the room, the IOT revolution is here, and it is only going to get bigger and more pervasive.

GLOB Stock and the Internet of Things

According to IDC, the global Internet of Things market will reach $1.7 trillion by 2020. Yes, you read that right, trillion.

Early on, most of the attention has been focused on the connectivity of the actual products, such as devices, network equipment and sensors. The Apple Inc. (NASDAQ:AAPL) Watch and its components for example, or the Fitbit Inc (NYSE:FIT) device you wear when you work out.

The hidden value however, lies not in products but the service providers that will help us navigate the physical and online worlds with less friction and more joy. The company driving such developments is Globant.

Consider that most big companies today are like gorgeous hotels with terrible customer service. There’s a mismatch in the way that they sell their products and the way they service those products in the digital age. Globant helps its clients bridge that gap between product and user experience.

The company has a very unique way in which it meets the demands of its clients to remain relevant and ahead of the curve in these new and emerging digital technologies. Globant has created 12 creative studios that each focus on a very specific solution. Consumer Experience, Wearables and IOT, Gaming, Enterprise, and Digital Content are examples of a few of these. Each studio is full of IT professionals who are experts in that field.

Despite a hiccup early in the year, Globant has performed very well yar-to-date, rising over 18% through early October — three times more than the broad market.

I selected it as one of my best ideas of 2016 based on its strong sales growth and dominant position in the rapidly expanding digital strategy consulting business. After another outstanding quarter of growth, I expect GLOB to finish the year strong.

Jon Markman operates the investment firm Markman Capital Insights. He also offers a daily trading advisory service, Trader’s Advantage, and CounterPoint Options, a service that helps individual traders make steady, consistent profits with volatility-related instruments. Follow him on Twitter for his latest take on markets and innovation.

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