These technology leaders can double your money in 5 years.
There are no guarantees in the stock market, but sticking with growing companies that are market leaders is one of the safest ways to pick stocks over the long term.
ServiceNow (NOW 5.40%) and Google's parent company Alphabet (GOOG 1.13%) (GOOGL 1.27%) are two major technology companies that have produced impressive financial results and pushed their stock prices to new highs. Here's why these stocks are smart buys for him into 2024 and beyond.
1.ServiceNow
Companies are always looking for ways to improve employee productivity, and generative artificial intelligence (AI) is increasingly being looked at as the answer in 2024. This is a huge opportunity for ServiceNow, a leading digital workflow platform.
The stock has delivered a cumulative return of 1,400% over the past 10 years, driven by an average annual earnings growth rate of 35%. The good news for new investors is that the company is still growing revenue at an impressive pace. In the most recent quarter, our generative AI solutions played a key role in securing good deals with other companies, driving subscription revenue up 24% year-over-year.
A big advantage of ServiceNow is our partnership with Microsoft to integrate Now Assist AI with Microsoft Copilot. This shows why ServiceNow is the gold standard in the digital workflow market. Most of ServiceNow's biggest deals in the quarter were for generative AI products.
Importantly, subscription-based businesses lead to stable long-term investments with recurring revenue streams and high profit margins. This explains why analysts expect the company's earnings per share to grow faster than sales at an annual rate of 29% over the next few years. This means that even if the investor were to pay a very high price-to-earnings ratio (P/E) of 77 times in the future, they could potentially double their investment in about five years. That's enough growth.
2. Alphabet (Google)
AI will have a lasting impact on the economy, and nowhere is this more evident than in the way people shop and find information online. This is why investors are increasingly looking to Alphabet as a key beneficiary of this innovative technology. Google has been investing in AI for years, and we're starting to see results.
First quarter sales and profits increased 15% and 61% year over year. The company is delivering these impressive results while investing in Gemini AI models to deliver smarter search results and other features to the billions of people who use Google products.
Google Cloud is also seeing strong demand for AI services from enterprise customers, which is becoming a lucrative revenue stream for Alphabet. Google Cloud last quarter he brought in operating profit of $900 million. This is up from just $191 million in the year-ago period. The company says its new AI models and algorithms are more than 100 times more efficient than they were just 18 months ago.
Although the stock hit new highs this year, it still trades at a reasonable valuation. Analysts expect Alphabet to grow profits at an annual rate of about 19% over the next few years. At a forward P/E ratio of 22x, investors can expect the company's stock to provide a return commensurate with future earnings growth. This could double over the next five years or more, depending on how well Google monetizes his AI capabilities across Search, YouTube, and Google Cloud.
Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. John Ballard has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and ServiceNow. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
