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This Dow Jones Stock Could Double Your Money

By James Brumley – Sep 17, 2021 at 10:11AM

Key Points

  • Spending on software, including online collaboration and data analytics, is projected to grow in excess of 20% per year through 2024.
  • CRM platforms are established, but new collaboration integrations are still being imagined.
  • Salesforce is in the right place at the right time to take advantage of this growth for years.

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The iconic blue-chip index has made some big changes in recent years to better reflect the modern marketplace.

The 30 names that make up the Dow Jones Industrial Average (^DJI -0.12%) are certainly well-respected blue chips. But potential doublers? That seems unlikely -- at least in the foreseeable future. After all, the Dow is a collection of the market's oldest, stodgiest, and slowest-moving companies meant for your grandmother's portfolio, right?

If that's your perception of the Dow Jones Industrial Average, you might want to take another look. In recent years, the DJIA has been tweaked and modernized for the current tech-driven era. More than that, though, it includes a handful of companies that are anything but old school. One of these stocks even has the potential to double its value (again) in less than five years.

A man and a woman smile while sitting at a table in a home counting cash they are holding in their hands and on the table

Image source: Getty Images.

It's not yesteryear's Dow Jones Industrial Average

The Dow component that has this potential: (CRM 0.54%).

Yes, the provider of a cloud-based, customer relationship management platform is, in fact, a DJIA component. It was added to the index in August 2020 (in the midst of the pandemic) along with Amgen (AMGN 0.73%) and Honeywell (HON -0.04%), replacing more-traditional stocks like ExxonMobil, Pfizer, and Raytheon Technologies.

That round of swapping was the latest in a bigger effort to bring the index further into the 21st century. Unsurprisingly, it has juiced the Dow's returns just a bit. It's up more than 90% for the past five years despite the early 2020 swoon linked to the onset of COVID-19, and higher by 200% for the past 10 years.

Salesforce didn't contribute to most of that bullish effort, but don't be surprised if it's a key driver of similar gains in the Dow over the next five- and 10-year stretches.

Salesforce's bright future

If you're not familiar with it, Salesforce is one of the original companies to commercialize cloud computing, before the term even began to be widely used. Its online customer database and customer-management platform were launched in 1999, and there was nothing else quite like it at the time.

That's certainly changed in the meantime. Not only is the customer relationship management (CRM) space now relatively crowded with competitors, but after 22 years of availability, the whole CRM thing has seemingly run most of its course. What's left?

As it turns out, for Salesforce, quite a lot.

Rising blue bar chart with arrowed trend line.

Image source: Getty Images.

The best days for basic CRM offerings might be in the rearview mirror, but what lies ahead are all sorts of revenue-bearing integrations with Salesforce's existing platform. For instance, earlier this week FedEx announced a partnership with Salesforce that will offer e-commerce and supply chain tools to business clients with such a need. In July, Salesforce completed its acquisition of intra-enterprise communication platform Slack, and by August had integrated its CRM tools with Slack's user interface. Salesforce-owned Tableau, which helps organizations collect and analyze all sorts of data, unveiled changes to its service earlier this month that will make it more secure, yet also easier to use at a greater scale.

And this is just a recent sampling of how the company continues to improve its suite of services. Others have yet to be imagined. They're coming, though, spurred by the emerging new norm in workplaces: working from home (or at least working there more often).

Capitalizing on the new norm

This wasn't exactly the plan a year ago. Most organizations that expected employees to regularly report to an office before the pandemic similarly expected them to return to the office once the pandemic had passed. Working from home has worked out better than most organizations could have hoped, however, and given that the coronavirus has yet to fully pass (and might never really do so), at least some companies are rethinking their office-attendance policies altogether.

Take researcher Omdia's recent Future of Work survey as an example. It indicates that more than two-thirds of all U.S. employers believe overall productivity has improved since workers were allowed to do their jobs outside of a centralized office. The same survey suggests more than half of all employees will be doing at least some work from home for the indefinite future.

In this vein, PwC reports that 72% of U.S. executives currently plan to increase their investment in virtual (online) collaboration tools. Technology market researcher IDC forecasts that spending on work-based software -- including cloud-based collaboration and analytics tools -- will grow more than 21% per year through 2024.

It all plays right into Salesforce's hands, setting the stage for the stock to move from its current price near $257 to a value in excess of $500.

Bottom line

There's still something of a wait before we see that move fully pan out, to be clear.

Salesforce is in the right place at the right time, and it's poised for more double-digit percentage growth for the next several years. But there are limits. This company's clients are other companies, for example, which tend to move slowly when making purchases and entering new service contracts no matter how great the need.

Compared to any other Dow component, though, Salesforce is still easily the company that's best positioned for strong, reliable growth for the next several years. (CRM) is a reliable revenue and earnings grower.

Data source: Thomson Reuters. Chart by author. Revenue data is in millions of dollars.

It's also worth noting that last year's pandemic-prompted profit surge isn't expected to be repeated, but easily could be repeated now that corporations have had time to think about and better plan their IT budgets.

In other words, CRM is absolutely worth the wait, although investors shouldn't have to wait too long before starting to make progress toward a doubling of the stock's price.

James Brumley has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends FedEx and The Motley Fool recommends Amgen. The Motley Fool has a disclosure policy.

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