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3 Stocks That Look Just Like Google in 2004

By Rich Duprey, Matthew DiLallo, and Brian Feroldi – May 20, 2017 at 1:18PM

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Finding the next Google is a worthwhile pursuit. Here are three companies that might just be it.

Do one thing and do it well has served as a guidepost for many companies over the years. It certainly helped Google when it was just starting out over a decade ago. While it has since morphed into a many-headed hydra known as Alphabet (GOOGL 5.68%) (GOOG 5.44%), with fingers in pies as diverse as Gmail, YouTube, Google Maps, Chrome, and Android, not to mention ads, commerce, apps, cloud, and hardware products, its heart will always be search.

That laser-like focus early on is what allowed it to be so successful, so we asked three top Motley Fool contributors to name a company they think is positioned today like Google was in 2004. Read on to find out why they believe ServiceNow (NOW 3.42%), Baidu (BIDU -0.75%), and Shopify (SHOP 6.86%) are similarly at the start of monstrous futures.

Digital representation of computers connecting in the cloud

Image source: Getty Images.

This SaaS company is on a growth tear

Brian Feroldi (ServiceNow): Companies that sell software-as-a-service (SaaS) solutions have been stealing market share away from legacy providers for years. The reason is that SaaS products feature low upfront costs and free customers from having to deal with upgrade or maintenance issues. Those benefits are causing scores of companies to make the switch.

ServiceNow is one such SaaS provider that has been growing like gangbusters since its founding in 2004. This company provides enterprise-level workflow software that is highly customizable and enables task automation. When combined with the platform's advanced data analytics capabilities, businesses everywhere have been clamoring to make the switch.

Last year, ServiceNow's revenue grew by 38% to $1.4 billion, which makes it one of the fastest-growing SaaS companies on the market today. While that's impressive, the company thinks it is still in the early innings of its growth cycle. The company's management team -- which now includes the former CEO of eBay (EBAY 2.68%) -- is targeting $4 billion in total revenue by 2020. That's the kind of rapid revenue growth that has helped power Google's stock higher over the years.

The only knock against investing in ServiceNow is that the stock is expensive. Shares are trading at more than 11 times sales and north of 58 times forward earnings. That hints that the stock could stumble if its growth engine fails to live up to expectations. Still, ServiceNow has so far proven itself more than capable of living up to high expectations. That makes it a great stock for growth investors to get to know.

Man standing amid digital abstract technology

Image source: Getty Images.

The Google of China and so much more

Matt DiLallo (Baidu): Chinese search giant Baidu has long reminded me of a younger version of Google. Like its search rival, Baidu dominates paid search in its home country. As a result, its sales and profits have grown exponentially over the years as users perform more searches, which draws more advertisers to its platform. Meanwhile, the company has ample running room to continue growing considering that just over half of China's citizens are even on the internet these days, which, for perspective, is where the U.S. was in 2001.

However, in addition to the untapped upside as it continues to expand its core search business, what has me most excited about Baidu is where it's heading next. Thanks to its cash-cow search business, the company has generated mountains of capital to invest in other ventures in search of its next big growth driver. One way it's doing that is by establishing Baidu Capital, which is a $3 billion fund that will invest in new technologies to drive growth in the future. Overall, the company has a slew of compelling projects in the works, including investments in autonomous driving, artificial intelligence, and online-to-offline, which will allow users to buy things directly from Baidu's platform via their Baidu Wallet accounts.

These investments are already beginning to pay dividends. CEO Robin Li noted recently that in 2017, the company is starting to gain momentum on its strategic evolution from a "mobile-first to an AI-first company," and that its "already seeing the powerful benefits of AI bear fruit across our existing platform." As this transformation continues, it has the potential to reaccelerate the company's growth rate.

With plenty of search-driven growth ahead of it on its home turf and compelling upside potential from new technologies in development, Baidu has the look of a company that could deliver Google-like returns in the years ahead.

Multiple screens expanding from computer monitor

Image source: Getty Images.

Building a brighter online retail future

Rich Duprey (Shopify): E-commerce accounted for 13.3% of all retail sales in the fourth quarter of 2016, according to the latest data from the Commerce Dept. Of the $929 billion in retail sales registered between October and December (adjusted for items not normally bought online, like cars, gas, and restaurants), internet retailers enjoyed a better than 14% gain in sales. While that's the smallest gain recorded since 2014, it's still well ahead of how the overall retail industry is performing.

That indicates e-commerce platform provider Shopify has a lot of growth potential ahead of it still by providing small- and medium-sized businesses (SMBs) with a vehicle for establishing web-based and mobile storefronts. It gives them the simple, seamless, and secure platform to sell their goods and services expected by consumers who want to be able to transact anywhere, anytime, on any device.

Shopify's stock has more than tripled in value over the past year on the strength of what CFO Russ Jones says is the e-commerce platform provider becoming the "de facto platform for sellers."

That kind of dominance has even reportedly attracted the notice of eBay, which was rumored to be considering buying Shopify. While it seems doubtful that would happen considering it shed payment service PayPal Holdings (PYPL 6.19%), it does indicate the kind of mindshare Shopify is generating and how integral it is becoming to buying and selling goods online.

That's the kind of positioning Google had back in the day as it sought to upend the dominant players at the time. While Google is so much more than just a search engine today, there's no telling where Shopify might find itself tomorrow. After all, no one anticipated Google morphing into Alphabet and owning not only search, but also Android, AdSense, mapping software, YouTube, Google Play, and more.

Shopify may be content to simply be the biggest, baddest e-commerce platform available, and that's fine, because even that niche represents a huge, multibillion-dollar opportunity that could one day see internet sales overtake sales at bricks and mortar retailers.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Alphabet (A and C shares) and Baidu. Matt DiLallo owns shares of Baidu and Shopify. Matt DiLallo has the following options: long January 2018 $18 calls on eBay, short October 2017 $33 calls on eBay, and short October 2017 $33 calls on eBay. Rich Duprey has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Baidu, eBay, PayPal Holdings, and Shopify. The Motley Fool has a disclosure policy.

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