At our monthly Investing Club meeting last Wednesday, Jim Cramer announced three new additions to the Bullpen: Cloudflare, ServiceNow and Nextracker. The Bullpen is the Club’s watch list of stocks considered as potential portfolio names. Here are the reasons why these highly specialized companies are on our radar. Cloudflare is what we call a connectivity cloud provider. It is part content delivery network and part cybersecurity provider. It manages web traffic for enterprise applications, typically websites, but also phone applications. NET YTD mountain Cloudflare YTD The main goal is reliability: ensuring that the website handles traffic smoothly and, above all, remains accessible. By the nature of its work, Cloudflare also has a cybersecurity component, as it helps protect websites from bots and automated attacks. You’ve probably seen the Cloudflare verification screen when you visit a new website. A very simple way to think about the business is to create a traffic cop for Internet traffic. In February, Cloudflare reported a strong quarter with better-than-expected revenue, earnings per share (EPS), and free cash flow. Management’s guidance was also strong, with sales and EPS beating expectations. CEO Matt Prince appeared on “Mad Money” to talk about the quarter. ServiceNow is a cloud computing platform that helps businesses manage their digital workflows. Jim said he was attracted to ServiceNow because of its large presence at Nvidia’s GTC conference last month. NOW YTD mountain ServiceNow YTD “They have become the great enabler of much of the non-customer-facing AI in enterprise and government. Think of them as productivity enhancers in every customer, playing the role I thought formerly that Accenture would play. They integrate between the AI platform and the productivity product,” Cramer explained during last week’s meeting. Indeed, ServiceNow offers one of the clearest paths among enterprise software companies to monetize AI. Through its Now Assist product, users can leverage generative AI to increase productivity and work smarter. Some use cases for NOW Assist include summarization, conversational exchanges, content creation, and code and flow generation. Nextracker could be a potential high-growth name. The solar tracking system maker allows huge arrays of large-scale solar panels to rotate and track the movement of the sun across the sky, maximizing their energy output. Their original innovation was a single-row tracking technology that allows each row of panels to move independently, rather than in unison. NXT YTD mountain Nextracker YTD Previously this technology was considered too expensive, but Nextracker has managed to reduce its costs to the point where it is now much more competitive. Over the years, Nextracker has added additional features, including self-powering systems, technologies that help improve energy efficiency over rough terrain or poor weather conditions, and equipment that protects solar panels during hailstorms. Nextracker is the global market share leader in this sector. Two-thirds of the company’s revenue comes from the United States, where it effectively has a duopoly with Array Technologies. The two companies collectively hold more than 80% market share. Nextracker’s revenue is expected to benefit from spending authorized by the federal Inflation Reduction Act, which included domestic manufacturing credits for this type of solar tracker. According to Goldman Sachs, these credits could increase Nextracker’s EPS by 20% to 50% in its 2025 fiscal year. CEO Dan Shugar appeared on “Mad Money” last month. Nextracker was downgraded to equal weight with a price target of $63 per share at Barclays on Tuesday morning. (See here for a complete list of Jim Cramer’s Charitable Trust stocks.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after a trade alert is sent before buying or selling a stock in his charity’s portfolio. If Jim talked about a stock on CNBC TV, he waits 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, AS WELL AS OUR DISCLAIMER. NO OBLIGATION OR FIDUCIARY OBLIGATION EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTMENT CLUB. NO SPECIFIC RESULTS OR PROFITS ARE GUARANTEED.
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