Thirty years ago, Intel (NASDAQ:INTC) was the world's largest computer chip maker, a position it still holds today, but it was on the cusp of transforming itself and the industry in ways unforeseen at the time.
We've asked three top Motley Fool contributors to identify a company they think can similarly change the way they're seen in their industry, and how their industry can transform as well. Read on to find out why they think Proofpoint (NASDAQ:PFPT), SunPower (NASDAQ:SPWR), and Axon Enterprises (NASDAQ:AXON) sit on the threshold of change.
Solution for growing threats
Daniel Miller (Proofpoint, Inc.): When you think of Intel 30 years ago, you conjure the image of a young technology company with innovative products. Intel's chips would bring processing and memory capacities that helped usher in the worldwide adoption of PCs. One company that also conjures the image of a young tech company that could alter the landscape of its industry is cyber security company Proofpoint, Inc.
For those who haven't heard of Proofpoint, it's a security-as-a-service provider with data protection solutions. Those services and solutions include threat protection, data governance, and secure communication, among many others. Just recently, the company launched its Digital Risk Defense service, which, according to Proofpoint, is the industry's first integrated phishing and fraud defense solution across critical digital channels.
The good news for investors? The cyber security company has high renewal rates (90%-plus last year), and it consistently ropes in new clients and consumers. Take the first quarter of 2017 as an example: Its total revenue was up 43% year over year, its billings were up a similar 40%, and it nearly tripled its cash flow.
More good news for investors: These problems aren't going away. Email threats remain a huge concern, with over 17,642 organizations victimized in the U.S. alone, according to Proofpoint's Analyst Day presentation in 2016. These concerns will only elevate with the expanding mobile and social networking presence in our lives. You'll have to pay a premium to own shares of Proofpoint, but it's a small price to pay if it can indeed change the industry's landscape as Intel did 30 years ago.
The Intel of solar technology
Matt DiLallo (SunPower): While the solar industry has been around for decades, it's just starting to gain traction in the mainstream. Fueled by climate-change worries and economics, solar installations around the globe are growing rapidly, with America's installed capacity, for example, doubling last year alone. Meanwhile, there's plenty of growth up ahead, with the U.S. Energy Information Administration, for example, anticipating that the nation's utility-scale solar generation capacity could increase another 48% by the end of next year. Despite that stunning growth, solar would still only account for about 1% of the country's total utility-scale electric generation.
While that massive addressable market alone is a big-time opportunity for leading solar technology company SunPower, what makes it stand apart from the crowd is its Intel-like innovation focus. That drive has enabled the company to build products that are light-years ahead of the commoditized components of its rivals when it comes to energy efficiency. For example, its Maxeon solar cells harness substantially more of the sun's power than a conventional panel, with its latest iteration expected to produce 70% more energy over the first 25 years than competitors' products. The company's efficiency lead should continue to widen in the future thanks to its investments in research and development that are driving improvements in energy production and cost.
It's SunPower's focus on always setting the bar higher that reminds me so much of Intel. It's why I think its stock could one day rival the tech giant's success and be a powerful value creator for investors.
A stunning transformation
Rich Duprey (Axon Enterprise): Being able to reimagine your core business and transform yourself into a wholly new -- but related enterprise -- is how I see Intel, and it's how I picture Axon Enterprise. While Intel is still closely linked with processors that came to define computing, today, it is so much more, and it's deeply embedded in the digital world around us.
That's what I see Axon doing. It is still very much the same company that came to define stun guns and has seen its Taser become synonymous with the less-than-lethal weapon, but it has now expanded beyond those narrow confines and opened up for itself new avenues of growth.
According to TASER's own figures, almost 98% of the 18,250 or so police departments in the country have purchased its stun guns. Certainly, there will be a need for upgrades and replacements over time, but it has pretty much tapped out that market.
It's in body cameras and evidence management where the best opportunities lie. As of the end of the first quarter, 36 of the country's 68 major city law enforcement agencies have purchased Axon's body cameras, its digital evidence management systems, or both. And it's the latter that ought to be the real driving force, because not only does it provide Axon with recurring streams of revenue, but it makes itself sticky in that once a department dedicates its evidence management to Evidence.com, switching costs rise astronomically.
Unlike a department swapping out a Smith & Wesson duty weapon for a Sig Sauer if features or firepower improve from one manufacturer to the other, logging evidence would seemingly have a huge cost in time and money if a department wanted to switch. It's much easier and cheaper to continue with what you've got.
That may ultimately prove to make Axon Enterprise even more of a transformational company than Intel, since swapping processors doesn't necessarily incur the same problems. And it's easy to see Axon moving beyond its close association with law enforcement -- perhaps even into the consumer realm.