Software Stocks Among Cloud Computing Companies To Invest In
1. Salesforce.com The longtime leader in software-as-a-service has formed cloud alliances with Alphabet’s Google unit and Amazon. Salesforce is on the IBD Sector Leader’s list. Salesforce’s $6.5 billion acquisition of MuleSoft is expected to boost its cloud strategy.
2. Veeva Systems The company develops cloud-based customer relationship management software for the life sciences industry. Veeva is ranked No. 1 in the IBD 50. Veeva company has more than 525 customers, ranging from the world’s largest pharmaceutical companies to emerging biotechs.
3. Palo Alto Networks The cybersecurity firm Palo Alto is making acquisitions to build out a cloud platform. Some analysts expect the newly launched “Cortex XDR” product to boost share gains. Cortex utilizes machine learning tools, a type of artificial intelligence.
4. Twilio The maker of business communications software rents infrastructure in Amazon data centers to host its tools. Twilio’s tools enable app developers to embed voice, text messaging and video into their products. Analysts expect Twilio stock to get a boost from its SendGrid acquisition.
No : Veeva Systems Inc
Here’s another specialty cloud infrastructure service. Veeva Systems Inc. is an American firm focused on pharmaceutical and life sciences industry applications.
This is like Salesforce, but for pharma.
Veeva’s cloud helps support critical functions of research and development in industry with CRM and other forms of data management.
Its services are increasingly in demand with the digitization of healthcare. And that’s reflected in its revenue growth.
Veeva has gone from $544 million to $1.1 billion in the last four years. Expect more from this company down the line.
It could be a bargain at $267.
What Is The Cloud
Up until the internet age, a cloud was simply those whiteand sometimes gray or blackthings floating in the sky. Clouds can still refer to those objects in the sky but the cloud can also refer to the way data is stored in the internet age. This is the the cloud that is related to computing or data centers that manage the data that is distributed on the internet and the devices that do the distribution. You can invest in companies that operate the cloud, provide services on the cloud, or own the cloud. These are the three basic types of cloud stocks to look at.
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Investing In Cloud Computing: A Megatrend Of The Future
Although for many years most of our tasks have depended directly or indirectly on the Internet, the truth is that, with the arrival of the SARS-CoV-2 pandemic, telework increased the demand for space in the cloud, which has benefited both technology companies and service providers.
In addition, many of the technologies we use every day, such as email, streaming, videoconferencing, online classes and even social networks make use of cloud computing. According to The 2020 IDG Cloud Computing Survey, more than 90% of companies have part of their information in this network of remote servers.
Experts say that global data is the new oil, as it will register an annual growth of 61% until 2025, going from 33 zettabytes to 175. By that year, it is predicted that 49% of the data will be stored in the public cloud. In this regard, it has been determined that this growth is independent of any economic conditions.
In 2020, the cloud storage market grew by $30 billion and, with a solid 10% annual increase, it is one of the main current investment trends. We tell you about its advantages and disadvantages in this article.
Benefits of investing in the cloud
In addition to the above, there are two fundamental factors that make it convenient to invest in the cloud, the first is that the cloud has favored business resilience and the second is that it has helped to turn the complex into simple.
A snapshot of the landscape
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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Types Of Cloud Technology Companies
Companies in the cloud space can be divided between three levels according to the services they provide. The largest cloud providers typically operate on multiple levels, while smaller players operate on just one level.
Infrastructure as a Service
IaaS platforms provide the basic data center infrastructure including servers and networking to their customers. Essentially, IaaS platforms provide their customers with scalable, virtual machines that they can use for any computing function. This gives customers the greatest flexibility, but customers are still required to provide and manage the operating system, middleware, data, and applications.
This segment is dominated by the big three of cloud computing Amazon, Microsoft, and Google. But there are other IaaS providers including the largest of chinas tech giants, IBM, and Oracle.
Platform as a Service
PaaS platforms provide the same infrastructure as IaaS platforms, and in addition an operating system, middleware, and runtime. Customers can then develop and distribute their own applications using on the platform. PaaS platforms allow companies to develop, use and distribute applications and databases without having to invest in hardware.
Software as a Service
Other related companies
Reaching For The Clouds
Data quoted represents past performance. Past performance is not an indication of future results and investment returns and share prices will fluctuate on a daily basis. Your investment may be worth more or less than your original cost when you redeem your shares. Current performance may be lower or higher than the performance data quoted. For most recent quarter end performance and current performance metrics, please click on the fund name.
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Disadvantages Of Cloud Technology
While there are many benefits to cloud computing, there are some minor disadvantages. Firstly, cloud applications rely on fast and reliable internet connections. While broadband penetration is relatively high in most cities, there are areas of the world that cannot access cloud services. Furthermore, cloud services are not available if a users connection is disrupted. The second disadvantage is that while cloud computing offers a lot of flexibility, it can be difficult to move to a new cloud platform. If service levels fall, or pricing is too high, changing cloud providers can be a time consuming and costly exercise.
In some instances, increasing the distance between a user or device and the server on which data is processed can increase latency. This is especially relevant to IoT devices that gather and process data in real time. The solution to this is edge computing which brings certain applications to the edge of a network and closer to where data is gathered. Although edge computing does the opposite of cloud computing, the two technologies are viewed as complimentary.
Cloud Computing Stocks To Buy For April 2022
The Nasdaqs steep correction provides a buy opportunity for these cloud computing stocks
- Datadog attracting more large-sized corporate customers
- Fastly quarterly losses forgivable as valuation falls
- Limelight Networks latest acquisition expands product offering
- Cloudflare high network performance will attract customers
- Shopify investments in business will expand market share
- Splunk investors expect the company to reach a path to profitability sooner
- VMware product portfolio leads to expanded margins
Investors panic-sold cloud computing stocks that benefited from the coronavirus-driven lockdown in the first quarter of 2022 as they worried that the trend was ending.
Cracks in even the most optimistic view for exponential growth faded. Cloud infrastructure companies posted weaker quarterly results. Management lowered guidance for the next quarter, then for the next full year.
At first, Fed members labeled inflation as transitory. Yet the great resignation, a movement that is potentially ending, forced companies to pay higher wages.
These two factors have combined to make several cloud stocks look much more attractive.
Looking ahead, the Feds higher interest rates will hurt stock valuations. This will create an attractive entry point for cloud computing stocks.
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Cloud Computing Stocks To Buy: Limelight Networks
Limelight Networks bottomed last year. With LLNW stock in a strong uptrend, investors should consider the company now. On March 7, Limelight acquired Yahoos EdgeCast CDN service.
Limelight will rebrand Edgecast as Edgio. This acquisition enables the company to offer edge computing, CDN and streaming delivery services.
Functions@Edge is an unexplored territory. FaaS is a serverless computing solution that customers will want. The Limelight and Edgio combination raises the firms global network capacity to more than 200Tbps and over 300 Points of Presence globally.
In January, Limelight said it set a new online traffic delivery record. Several of Limelights largest clients increased their volumes.
The companys strong start this year will lift quarterly results. Furthermore, past investments in research and development improved Limelights network performance. Despite congested and changing network conditions, clients did not face any quality issues. In the next earnings report, expect LLNW stock to rise as it posts higher gross margins.
When Limelight increases its gross margin forecasts for the year, the stock has a good chance of rising further.
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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The Bottom Line: Best Cloud Computing Stocks
Like most verticals in the technology environment, Big Tech companies lead the charge, and its no different when it comes to cloud computing.
We believe the best way to get exposure to the rise of cloud computing is to invest in companies providing the infrastructure.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best cloud computing stocks.
This article was updated on May 5th, 2022 to reflect the changes in performance and characteristics of each stock.
Sean Graytok is our Co-Founder and leading expert in investing and financial management. His work has been cited in leading industry publications, such as InvestorPlace and Business Insider. Sean is interested in the people and technologies that are improving the world.
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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Zoom Video Communications Inc
No of HFs: 59
Total Value of HF Holdings: $6.00 Billion
Modern video communications provider Zoom Video Communications, Inc ranks 12th in our list of 14 best cloud computing stocks to invest in. Zoom provides a cloud platform for video and audio conferencing, chat, and webinars. During the COVID-19 pandemic, the cloud platform provided an avenue for most company’s regular conferences raising its total user base to more than 200 million in March 2020. In Europe alone, the number of installs was 124.7 million, up 2,670% compared to 2019. The company recently announced a partnership with one of the highest class auto racing cars worldwide, Formula One, to deliver communication services during the 2021 Formula One World Championship. The partnership will continue through ongoing competitions.
The company’s market cap is $94.77 billion. In the second quarter of the fiscal year 2021, the company’s revenue increased 355% to $663.5 million. Shares of ZM jumped 159% over the last twelve months.
Baron Opportunity Fund mentioned that ZM remains a leading player in the unified communications market in its Q4 2020 investor letter:
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Published on September 1, 2022 at by Inan Dogan, PhD
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they werent called hedge funds, they were called partnerships. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S& P 500 Index returned 43.4% in 1958. If Warren Buffetts hedge fund didnt generate any outperformance , Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund fees.
Actually Warren Buffett failed to beat the S& P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as fees. His investors didnt mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffetts hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as fees. S& P 500 Index lost 10.8% in 1957, so Buffetts investors actually thrilled to beat the market by 20.1 percentage points in 1957.
As you can guess, Warren Buffetts #1 wealth building strategy is to generate high returns in the 20% to 30% range.
So, how did Warren Buffett manage to generate high returns and beat the market?
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No : Salesforcecom Inc
Salesforce.com Inc. is a more specific example of platform as a service, called customer relationship management . It is a popular cloud software that organizations use to manage customer information.
As “The World’s No. 1 CRM Platform,” Saleforce boasts over 150,000 customers, ranging from small to large companies in public and private sectors.
This is seen as another top cloud stock to buy as Big Data and analytics become increasingly important to customer relationships.
Salesforce has increased revenue by 117% since 2017. It broke the $1 billion mark in profits in 2019, and it’s not slowing down.
You can buy shares for $202 right now.
What Are The Best Cloud Computing Stocks
The best cloud computing stocks are the FAAMG giants: Amazon, Microsoft, and Google.
These tech giants dominate the IaaS space and control over 60% of the worldwide ecosystem.
However, there are several software-as-a-service companies that may be worth your time and money as well: Salesforce, Dropbox, Zoom , Twilio , Snowflake , Oracle .
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No : International Business Machines Corp
International Business Machines Corp. is a New York–based multinational tech company. Founded in 1911, this is one of the original tech stocks and an Internet pioneer.
Today, it does everything from artificial intelligence to blockchain, data and analytics, and yes, cloud computing.
It’s struggled to consistently grow profits through the 2010s. But it’s quickly adapting to the new tech landscape. It has been making some headway in the cloud market.
In 2019, IBM bought one of the world’s leading software companies, Red Hat, for $34 billion.
IBM has asserted itself as a specialty cloud provider in the financial sector. The company is over $100 billion in market cap and still growing.