3 Cloud Computing Stocks Still Performing Well
There are many industries that are not performing well in the current market environment. That said, if you’re currently in business, cloud computing isn’t a bad place to be, even now. As a result, there are some cloud computing stocks definitely worth watching right now.
What Is Cloud Computing?
First of all, what is “the cloud”? It is not some fluffy white mist in the sky. The cloud is essentially composed of computer servers that enable you to access applications and software from anywhere in the world via the internet.
Do you remember the days when you had to physically load software – programs like Microsoft Office or Adobe Photoshop – onto your computer using a hard disk? Now you can just receive these programs over the internet.
There has been an explosion of new products and services that are fully cloud-based. These involve everything from software to networking, databasing, data warehousing, analytics and more. A virtually unlimited number of applications run from anywhere in the world thanks to the cloud.
About the Cloud Computing Industry
According to Statista, the cloud computing industry had a market capitalization of about $178 billion in 2018. A decade prior, the cloud computing industry was worth less than $6 billion.
And the explosive growth of the industry continues, perhaps now more than ever. The industry was projected to be worth a total $236 billion in 2020. That’s a two-year compound annual growth rate of 15.15% annually.
With COVID-19 forcing more people than ever to work remotely, cloud computing is all but certain to become more important to commerce than ever.
There are a ton of familiar names when it comes to businesses engaged in the cloud computing industry. Some of these cloud computing stocks include IBM (NYSE: IBM), Amazon (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), Salesforce (NYSE: CRM), Dell (NYSE: DELL) and Adobe (Nasdaq: ADBE).
Three Cloud Computing Stocks to Watch
When it comes to cloud computing stocks you may want to buy, I identified three stocks in three different areas of cloud computing. They have performed well in this difficult environment and have strong prospects for healthy growth in the future.
These three cloud computing stocks range from biotechnology services to in-home entertainment to workplace collaboration tools. So let’s jump right into the first one:
1. Veeva Systems
When it comes to cloud computing stocks, Veeva Systems (NYSE: VEEV) may be situated in exactly the right time and place. That’s because Veeva is a cloud provider of services to the life sciences and pharmaceutical industries.
Peter Gassner and Matt Wallach founded the Silicon Valley company in 2007. And now Veeva Systems is a key player in helping companies develop testing, treatments and vaccines for COVID-19. And the company is helping to accomplish this work virtually using cloud computing.
Some of the company’s major biotech clients include Biogen (Nasdaq: BIIB), Eli Lilly (NYSE: LLY) and Gilead Sciences (Nasdaq: GILD). And the product being made use of by these and many other companies is called Veeva Engage.
Veeva Engage is a customer relationship management (CRM) platform specifically tailored to the life sciences and pharmaceutical industries. Using cloud computing technology, Veeva Engage allows for video conferencing services – a collaboration with Zoom – as well as content-sharing apps.
Healthcare companies are able to use these tools to connect with doctors virtually. They are then able to supply care to patients via telehealth services. In the last two weeks, use of the platform, which is temporarily being made available for free, is up by 10 times.
In 2019, Veeva Systems earned $301 million on sales of $1.1 billion. Both revenues and earnings have increased significantly each year over the last four years.
And although cash is down very slightly from 2018, by -0.2%, this is due to heavy investment and financing of those investments. Net cash flow from operations in 2019 was $437 million, an increase of 40% over 2018.
As a result, Veeva Systems’ stock price has been doing very well this year. The stock is currently trading around $160, representing a year-to-date return of about 13.28%. Compare this with the return of the S&P 500, which has been -13.65%.
Have you been watching Tiger King like everyone else during the COVID-19 pandemic? I certainly have. Which means I have been glued to Netfix.
Netflix (Nasdaq: NFLX) is my sanity during our quarantined times, and has been for many other investors as well. Netflix is a cloud computing-based entertainment and media streaming company that delivers original and licensed content direct to consumers over the internet.
The company’s headquarters is in Los Gatos, California. Reed Hastings and Marc Randolph founded it back in 1997. The firm originally focused on DVD delivery via the United States Postal Service. But the firm converted to putting streaming first, which has been nothing short of miraculous for its investors.
Now, with people stuck at home and lacking options for entertainment, Netflix has become an obvious go-to choice. And the company has already seen great benefit from this.
Netflix stock gained 16% in the first quarter. Meanwhile, the company plans to unveil is first quarter earnings on April 21.
How is the forecast looking? In the famous words of Larry David, it is looking “pretty, pretty, pretty good.” Netflix is forecasting revenues of $5.73 billion, yielding a diluted earnings per share (EPS) of $1.66. In the previous quarter, Neflix saw revenues of $5.467 billion and a diluted EPS of $1.02. And that was before coronavirus mass hysteria.
On the year, Netflix stock rose from $324.78 to around $370 for a year-to-date return of about 13.92%. Assuming Netflix’s quarterly forecast holds up, expect more good things from this cloud-computing stock in the coming days.
3. Microsoft Corporation
You may not think of Microsoft Corporation (Nasdaq: MSFT) as a cloud computing stock. But it most certainly is, thanks to products like Microsoft Azure and Teams. And as it turns out, it’s one of the better cloud stocks available on the market.
Bill Gates and Paul Allen established Microsoft Corporation in 1975 in Redmond, Washington. The multinational tech firm creates, produces, sells (and licenses), and supports computer hardware, software, consumer electronics and more.
One of its most important cloud-related products is Microsoft Azure. Azure is a cloud computing service that allows other companies to build, test, release and manage cloud-based applications and services. One of Azure’s primary competitors is the similar service provided by Amazon, AWS. Azure, among other things, makes heavy use of Microsoft’s artificial intelligence technology.
Another important cloud-based application by Microsoft is its Teams product. Microsoft Teams is a workplace communication and collaboration tool that makes remote working possible and even easy. It combines elements like chat, video conferences, content and file storage, and more. Microsoft’s primary competitor in the workplace collaboration tools space is Slack.
In quarter two of fiscal year 2020, Microsoft generated $125 billion in revenue and $39 billion in profits. This represents revenue growth of 14% and earnings growth of about 30%.
As a result, Microsoft’s stock has performed well on the year. Microsoft stock is currently trading around $165, which represents a year-to-date share price growth of 3.12%. This may not sound like much. But in a terrible market environment, I’d take this growth in a heartbeat.
Concluding Thoughts on Cloud Computing Stocks
No stock is a sure bet in the current market environment. But these cloud computing stocks have enormous potential to not just survive but also thrive despite the coronavirus lockdown.
To stay up to date on what’s happening in the markets, with cloud computing stocks, and with tech stocks more generally, make sure to sign up for our free daily Investment U e-letter. Inside you will find the best thinking from some of the top investment experts in the business, for free, each and every day.
About Brian M. Reiser
Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.
He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.
His primary interests at Investment U include personal finance, debt, tech stocks and more.