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Cramer’s next big cloud play

Cramer's has discovered a smaller and more speculative way to play the cloud. Intrigued?

"I'd like to introduce you to ServiceNow," said the Mad Money host.

Founded in 2003, Cramer believes is on the cutting edge of new technology that's incredibly desirable for businesses of all shapes and sizes.

"The company has created an easy-to-use cloud-based development platform that allows IT managers to write their own applications," Cramer said.

Although other companies such as Hewlett-Packard and IBM are also developing similar products, Cramer says, "ServiceNOW leaves these old-school competitors in the dust!"

"Not only does ServiceNOW have superior technology and very strong customer support, but the total cost of ownership for their software is 50% less than the competition," Cramer explained.

A superior product sold at a lower cost - that sounds like a textbook scenario for booming sales. "At the end of last year, they had a $550 million backlog of business," Cramer added.

Colin Anderson | Blend Images | Getty Images

And the rate of growth over the next few years is significant.

"ServiceNow is expected to generate $410 million in revenues for 2013. Meanwhile, management thinks they can grow that number to $1 billion dollars by 2016. That's a 35% compound annual growth rate," Cramer said.

Looking at the potential, Cramer can't help but wonder if ServiceNow is at a stage in its growth that's somewhat similar to in 2005. At that time Salesforce went into hyper-growth mode and shares surged in lockstep with the business.

Now make no mistake, a stock with big reward potential also presents greater risk. ServiceNow is relatively small and there are headwinds blowing.

1. ServiceNow is not yet profitable.

2. On a price to sales basis, ServiceNow is trading at 11.5 times next year's sales estimates, which is quite expensive.

3. ServiceNow is a momentum stock with earnings due next Wednesday. Even the slightest misstep and the stock could tumble.

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Considering all the catalysts both positive and negative, Cramer came up with the following strategy.

"Put on a small position on Tuesday or Wednesday before the company reports. But hope for a misstep. Then establish the rest of your position on a sell-off. In this case, I believe the reward is well worth the risk.'

Call Cramer: 1-800-743-CNBC

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