Best Cloud Computing Etfs For 2022
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SKYY, ARKW, CLOU, and WCLD are the best cloud computing ETFs for 2022.
Below, we will discuss their differences along a number of axes, such as performance, size, and the area of cloud computing that the fund focuses on.
Best Cloud Computing Stocks For 2022 And Beyond
If someone asks me what cloud computing is, I try not to get bogged down with definitions. I tell them that, simply put, cloud computing is a better way to run your business.
A better way to run your business: This has been the idea behind a market that is worth billions of dollars. And over the next couple of decades, the cloud computing market is going to get bigger and bigger like a fine wine that gets better with age.
According to Facts and Factors Market Research, the global cloud computing market in 2019 was approximately $321 Billion. The market is expected to grow at a CAGR of 18% and is anticipated to reach around $1.0259 Trillion by 2026.
Benioff in an email Q& A with Mercury News defined Cloud computing is a technology model that refers to anything that involves delivering services over the Internet.
Based on the aforementioned definition you can begin to see why cloud computing is a big deal, so big the World Economic Forum identified it as a major driver of the Fourth Revolution along with artificial intelligence, fully autonomous vehicles, and 5G among others.
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More businesses are moving operations over to the cloud at a rate higher than anticipated as a result of lockdown restrictions on various physical business operations in many countries including the United States. And on another hand, consumers demand for cloud-based services is exploding.
CLOUD COMPUTING IS BOOMING.
Investing In Cloud Exchange Traded Funds
There are ETFs that bundle together cloud computing companies into ONE type of investment, allowing you to get more diverse spread of companies, without the trouble of investing in each one. Some of the stocks mentioned above will be included in the holdings of these ETFs.
- First Trust Cloud Computing ETF
- Next Generation Internet ETF from Ark Funds
- WisdomTree Cloud Computing ETF
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What Tech Investors Should Know About Cloud Stocks
Brian Edmondson is a banking and online business specialist with two decades of experience working in the financial industry as an employee and an entrepreneur. Brian is the founder of the Bankruptcy Recovery Foundation, a regular contributor to Entrepreneur, and was a financial analyst and advisor at Merrill Lynch.
Its amazing how many types of stocks, hedge funds, and investment vehicles there are on the market today. There are so many different types that it can be an awful lot to sort through.
One kind of stock has been recently catching more attention of those who pay attention to less mainstream investments and niche stock sectors is a type of stock referred to as a “cloud stock.”
Well go into different types of cloud stocks and different cloud stock companies in this article, but first, lets take a look at what the cloud is.
M& a Activity Is Still Active
While it is true that not every cloud-focused company is involved in M& A, even amidst the share price performance turmoil of 2022, companies are still active.
- Google Cloud has announced its intention to buy Mandiant , a cybersecurity firm, for $5.4 billion. The rationale is to provide its cloud customers with more robust cybersecurity solutions at a time when this is at the forefront of many customersâ minds.
- Shopify has announced its intention to buy e-commerce fulfillment specialist Deliverr for $2.1 billion.
Cloud Computing Stocks Are Still Delivering Elevated Growth Rates
Some of us might have thought that there has been so much discussion about Western central banks shifting policy from extremely âeasyâ to extremely focused on mitigating the risk of runaway inflation that this must have been priced into equity markets. The recent behavior of software-oriented cloud computing companies would tell us something differentâadjustments are clearly still being made. Our bottom line is thisâthese subscription-oriented businesses are still largely growing their revenues, even if that growth is nowhere near what would have been seen during the pandemic period in 2020. Those with a time horizon of the next few months may have an extremely uncertain outcome. Those with a time horizon in the range of 5, 7 or 10 yearsâas long as the cloud business model continues to find favorâmay see this downdraft as an interesting opportunity.
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How To Trade Or Invest In Cloud Stocks
There are two main ways in which you can trade or invest in cloud stocks. First, you can decide to focus on them individually. This is where you focus on trading individual names in the industry lik Salesforce and Digital Ocean among others.
As an investment strategy, this one is usually riskier because of the huge swings that happen. For example, as you can see below, the Docusign stock price crashed by over 20% in a single session.
The other alternative is to focus on cloud computing ETFs. An ETF is made up of tens or hundreds of companies.
There are two types of ETFs. First, there is an active ETF, which is managed by a team of money managers. Second, there is a passive ETF that tracks an existing index.
Examples of the leading cloud computing ETFs are Global X Cloud Computing ETF, Fidelity Cloud Computing ETF, and Wisdom Cloud Computing Fund.
Why Invest In Cloud Technology
The cloud industry is one of the fastest growing areas of the technology sector. Many cloud technology companies and their stocks have performed very well during 2020, despite the covid-19 pandemic. While historical growth has been strong, there is a long way to go as businesses migrate more activities to the cloud. In 2019, global cloud revenue topped $233 billion, but the industry is expected to generate $1 trillion in revenue within the next five to seven years.
In addition, the flexibility that cloud computing offers makes a large number of new services and business models possible. Investors can now participate in brand new industries with massive potential markets. Cloud technology is also the backbone for many of the companies riding the megatrends that are shaping the investment landscape. Investors can invest in the companies that provide cloud infrastructure and the hardware that goes with it, as well as the companies leveraging the benefits of cloud technology.
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Key Data To Watch In Cloud Stocks
Investors and traders focusing on cloud computing pay a close attention to several key numbers. Examples of them are:
- Revenue growth – This is probably the most important data because most of these firms are in a growth phase. Ideally, most investors love companies that are growing at double-digits.
- EBITDA growth – A good number of cloud companies are yet to break even. Therefore, many people watch their EBITDA growth instead.
- – Another gauge that is watched closely is known as margin expansion. This one refers to the difference between sales and profits. Ideally, you want a company that is growing its gross and profit margin.
- ARPU – This metric measures the Average Revenue Per User. It measures what every user of the company is paying.
- Regional data – Ideally, most investors love cloud companies that are winning new customers internationally.
How To Analyze Cloud Computing Stocks
Cloud stocks typically fall into the growth stocks category. This means valuation metrics are of limited use when finding stocks to buy. More important are revenue growth, margin growth and the potential market size. The following are a few of the factors to consider when stock picking in the cloud space:
Price to sales ratio
A lot of cloud stocks are not yet profitable. This means price to earnings ratios are of little use. Instead, you can use the price to sales ratio to compare one stock with another. While the price-to-sales ratio for the broader stock market is around 1.5, for cloud stocks it is typically higher than 5, and can be as high as 50. The higher the ratio the more certain you need to be that revenue growth will continue. Alternatively, if margins are expanding rapidly, a high price to sales ratio may be sustainable.
The rule of 40
A companys long-term earnings potential depends on revenue growth and margin expansion. The rule of 40 has emerged as a popular way to identify cloud stocks with good prospects. To test a stock, you simply add the annual revenue growth rate to the net profit margin. So, a company with revenue growth of 35% and a net profit margin of 10% will have a score of 45. If the result is above 40, the stock is worth considering. This addresses the tradeoff between growth and margins for growth stocks and ensures that a company scores well on at least one of the two metrics.
Total addressable market and market share
Trend and momentum
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Proshares Ultra Nasdaq Cloud Computing Etf
SKYU is a fund that aims to correspond with two times the daily performance of the ISE CTA Cloud Computing Index. Its holdings are in companies classified as cloud computing and companies that are engaged in infrastructure-as-a-service, platform-as-a-service, and software-as-a-service.
Its top 10 holdings include sector giants: Alphabet, Microsoft, Amazon, and Alibaba. New investors can be assured that well-reputed companies mean lower risk of investment. SKYU is appealing with its ambitious goals of return and if interested, you should weigh its addition against the balance of your portfolio.
The Global Cloud Computing Stock Market Is Expected To Hit Us$79148 Billion In 2028 With A Cagr Of 179%
Cloud computing stocks are in high demand for the emergence of digitalization since the outbreak of the COVID-19 pandemic. Investors have started keeping an eye on cloud computing stocks apart from tech stocks as well as the cryptocurrency market. The global cloud computing stock market is expected to hit US$791.48 billion in 2028 with a CAGR of 17.9%. Multiple tech companies are leveraging cloud computing making it a profitable investment for the tech-driven future. Lets explore the top 5 cloud stocks in 2022 that are suitable for investment.
Veeva Systems
Stock Market Price: US$207.16
Veeva Systems is a popular tech company that provides cloud-based software for the life science industry in different parts of the world. There is a wide range of products and services related to cloud computing which makes it one of the top cloud computing stocks to buy in 2022. Its current stock market price is
Unity Software
Stock Market Price: US$42.33
Unity Software is a well-known tech company that works with cloud computing and is one of the top cloud computing stocks for investors in October. It operates a real-time 3D development platform that provides software solutions for different smart devices such as mobile phones, PCs, consoles, and many more.
DigitalOcean Holdings
Stock Market Price: US$44.85
The Trade Desk
Stock Market Price: US$44.29
Oracle
Stock Market Price: US$71.99
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Cloud Computing Companies Are Moving To Edge
Winning Facebook or Apple as a customer can be the gift that keeps on giving for cloud computing companies that make brainy computer chips or fiber-optic communications gear.
However, the internet cloud is moving out of data centers into “edge” applications, opening up a new market opportunity.
Edge computing deploys data processing, storage and networking close to sensors and where other data originate. Edge computing is the next step that companies like Amazon are taking to expand the cloud. In addition, a new wave of startups as well as tech industry incumbents are targeting this next evolution in cloud computing.
Follow Reinhardt Krause on Twitter @reinhardtk_tech.
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Best Cloud Computing Stocks To Invest In
In this article, we are going to talk about the 14 best cloud computing stocks to invest in. You can skip our detailed discussion about the trends in the Cloud computing industry and go to the 5 Best Cloud Computing Stocks to Invest In.
Cloud computing is one of the most in-demand and fastest-growing tech sectors boosted by digitalization, especially during the pandemic. The COVID-19 pandemic further highlighted the demand for cloud computing services given their flexible costs, scalability, and efficiency. According to a PWC study, in the first quarter of 2020, spending on cloud computing was already at $29 billion, up 38% compared to the same quarter of 2019.
Cloud computing is the fastest-growing tech segment in the market, with over 3.6 billion users in 2018 and a global market size that reached $266 billion in 2019. Many investors believe that the cloud computing industry will continue to grow as more companies adapt to the work-from-home era. For instance, during the enforced lockdown, companies relied solely on the adaption of Software-As-A-Service based solutions to safeguard their employees. According to a study published in Insivia, in 2021, SaaS spending for more prominent companies will reach $4.16 million.
Fund managers are starting to cut back on tech stocks due to the 10-year treasury yield increase from around 1.07% in February to 1.68% in March. Speculations that inflation will continuously increase are pushing investors to invest in more low-risk stocks.
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Alibaba Group Holding Limited
No of HFs: 156
Total Value of HF Holdings: $17.8 Billion
Ranking 4th on the list of 14 best cloud computing stocks to invest in is Alibaba Group. Founded in 1999 by Jack Ma, the cloud computing company operates the most prominent e-commerce market in China. In the fourth quarter of 2020, the company increased its active users to 779 million, up 2% from 757 million in the third quarter. The cloud computing giant was recently fined $2.8 billion by China after the firm reportedly violated Chinas anti-monopoly law. However, the penalty was not likely to damage the growth of Alibaba, with records of solid gains in 2020.
The companys revenue in 2020 came in at $72 billion. The stock gained 13% over the last twelve months. Citigroup keeps its Buy rating on Alibaba Group Holdings and raises its price target to $345 per share.
Davis Funds mentioned that BABA will maintain its leading position in the e-commerce sector in its Q4 2020 investor letter:
The current focus of the Chinese government is on e-commerce and consumer finance, impacting companies such as e-commerce leader Alibaba, resulting in the delay of the ANT Group IPO. Our expectation is that while a company like Alibaba will have to eliminate business practices such as exclusive supplier arrangements, it will maintain its leading position in the thriving Chinese e-commerce sector due to its brand, scale, network effects and ability to innovate.
Best Cloud Computing Stocks: Background
Cloud computing is the delivery of on-demand computing services from applications to storage and processing power typically over the internet and on a pay-as-you-go basis.
Before cloud computing, companies had to own or maintain their own centralized IT infrastructure, which was extremely expensive and complex.
The services that cloud companies provide generally fall into one of three main categories, including:
Infrastructure-as-a-Service this is the fundamental building blocks of computing, entailing access to computing resources such as servers, storage, and networking.
- Examples: Amazon Web Services and Microsoft Azure
Platform-as-a-Service this provides users with a cloud environment in which they can develop, manage, and deliver their applications by using a suite of prebuilt tools offered by the provider.
- Examples: AWS Lambda and the Google App Engine
Software-as-a-Service this offering provides users with access to a vendors cloud-based software and applications via a subscription model.
- Examples: Salesforce, Microsoft Office 365, and DocuSign
As you can see, several of these companies, like Amazon and Microsoft, compete in each one of these service domains. But without further ado, lets look at the best cloud computing stocks.
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Take A Deeper Dive Into Cloud Stocks
1. Dropbox
Dropbox, Inc. provides a content collaboration platform worldwide. Its platform allows individuals, families, teams, and organizations to collaborate and sign up for free through its website or app, as well as upgrade to a paid subscription plan for premium features.
Dropbox stock opened the day at $20.90 after a previous close of $20.72. The latest price was $21.40 . Dropbox is listed on the NASDAQ, has a trailing 12-month revenue of around USD2.3 billion and employs 2,667 staff.
- : $7,641,556,480
Amazon Zendesk And Cloudflare Are Solid Cloud
The cloud computing market is a core growth engine of the tech sector. Cloud infrastructure platforms power countless websites, apps, and streaming media services, and also provide companies with extra storage and computing power. Cloud-based software services can also analyze data, help companies make decisions, and enable people to work remotely.
The global cloud computing market could still expand at a compound annual growth rate of 19.1% between 2021 and 2028, according to Research and Markets, so there’s still plenty of room for the market’s top cloud stocks to run. Let’s take a look at three top names in this sector that are worth buying right now.
Image source: Getty Images.
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International Business Machines Corp
No of HFs: 51
Total Value of HF Holdings: $998 Million
Ranking 13th in our list of 14 best cloud computing stocks to invest in is one of the most valuable computer firms worldwide, International Business Machines, Corp. The company specializes in over 170 products, including its hybrid cloud platform that combines platform as a service with infrastructure as a service which caters to small and large businesses. IBM recently announced the worldwide availability of its financial service-ready cloud platform to help decrease financial institutions’ risk. The cloud computing platform is in collaboration with Bank of America who first used the service in 2019.
The company has a market cap of $121.29 billion and currently offers a dividend yield of 4.80%. IBM’s revenue in the full year 2020 is $73.6 billion. Shares of IBM surged 16.77% over the past twelve months. The hedge fund run by Peter Rathjens, Bruce Clarke, and John Campbell is the most significant stakeholder of the company with 2.7 million shares, with $344 million.
