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13 Best Cloud Stocks To Buy Now

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·13 min read
In this article:
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In this article, we discuss the 13 best cloud stocks to buy now. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Cloud Stocks To Buy Now.

The cloud sector has been pummeled in recent weeks after the Federal Reserve indicated that interest rate hikes are on the way, resulting in a mass exodus from growth towards value at the market. The cloud industry has outperformed the broader industry by a wide margin over the past decade. The BVP Cloud Index, created by Bessemer Venture Partner and comprising cloud companies, has gained more than 900% since 2013. This is triple the gain of the growth-heavy NASDAQ during the period, indicating the performance of the cloud industry within the tech sector, and almost five times the gains of the benchmark S&P 500.

Buying The Dip and Future Trends In Cloud Market

This is why investors are a little confused with regards to investing in cloud plays. However, analysts have urged investors to buy the dip in cloud stocks given the strong fundamentals of cloud firms and growth catalysts moving forward. Some of the top cloud stocks to buy now include Microsoft Corporation (NASDAQ:MSFT), Salesforce.com, Inc. (NYSE:CRM), and Twilio Inc. (NYSE:TWLO), among others discussed in detail below.

According to predictions from Gartner, a tech research firm, the global spending on cloud services will climb from $313 billion in 2020 to around $480 billion in 2022, with Internet-of-Things (IoT) infrastructure and virtual reality advances leading the way. Sustainability and the rise of serverless operations are also likely to be important industry trends that investors should keep eye on when investing in the sector.

Our Methodology

The companies that operate in the cloud sector were selected for the list through a careful assessment of business fundamentals and analyst ratings to provide readers with some context for their investment choices.

Hedge fund sentiment was included as a classifier as well. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.

13 Best Cloud Stocks To Buy Now
13 Best Cloud Stocks To Buy Now

Photo by Science in HD on Unsplash

Best Cloud Stocks To Buy Now

13. DigitalOcean Holdings, Inc. (NYSE:DOCN)

Number of Hedge Fund Holders: 27

DigitalOcean Holdings, Inc. (NYSE:DOCN) is a cloud computing platform that focuses on startups and developers. In the fast growing cloud sector, this focus has separated DigitalOcean Holdings, Inc. (NYSE:DOCN) from other cloud firms. DigitalOcean Holdings, Inc. (NYSE:DOCN) went public in 2021 and the share price has nearly doubled since then. DigitalOcean Holdings, Inc. (NYSE:DOCN) provides cheaper services compared to competitors and has a better retention rate. The firm is also working to improve margins while retaining small customers.

Hedge funds are also bullish on the future of DigitalOcean Holdings, Inc. (NYSE:DOCN) in the competitive cloud sector. 27 hedge funds in the database of Insider Monkey held stakes worth $758 million in DigitalOcean Holdings, Inc. (NYSE:DOCN) at the end of September 2021, up from 16 in June 2021 worth $219 million.

Just like Microsoft Corporation (NASDAQ:MSFT), Salesforce.com, Inc. (NYSE:CRM), and Twilio Inc. (NYSE:TWLO), DigitalOcean Holdings, Inc. (NYSE:DOCN) is one of the stocks that hedge funds are buying.

12. NetApp, Inc. (NASDAQ:NTAP)

Number of Hedge Fund Holders: 29

JPMorgan analyst Samik Chatterjee recently upgraded NetApp, Inc. (NASDAQ:NTAP) stock to Overweight from Neutral and raised the price target to $110 from $108, noting that NetApp, Inc. (NASDAQ:NTAP) seemed “well positioned” to transition towards higher growth opportunities while being the leader in the enterprise storage sector. The analyst touted the potential of NetApp, Inc. (NASDAQ:NTAP) as companies moved towards “all-flash arrays” in the cloud.

NetApp, Inc. (NASDAQ:NTAP) is among a handful of cloud companies with an impressive dividend history, giving the stock a healthy blend of growth and value for investors. NetApp, Inc. (NASDAQ:NTAP) has registered eight consecutive years of dividend growth and recently declared a quarterly dividend of $0.50 per share. The forward yield was 2.25%.

In its Q3 2021 investor letter, Miller Howard Investments, an asset management firm, highlighted a few stocks and NetApp, Inc. (NASDAQ:NTAP) was one of them. Here is what the fund said:

“Technology remains important in our portfolios, although the sector weights have come down over the past year. We now hold NetApp (NTAP) of which has a strong growth prospects, yet attractive valuations in our view. Unlike many younger tech companies, we believe our holdings should significantly benefit from an upturn in the economy.”

11. Dynatrace, Inc. (NYSE:DT)

Number of Hedge Fund Holders: 41

Dynatrace, Inc. (NYSE:DT) provides software intelligence for multi-cloud environments. As businesses go digital, many companies have to manage multiple cloud operations. Dynatrace, Inc. (NYSE:DT) provides services that can make that complexity easier to manage. The company has also integrated artificial intelligence onto the Dynatrace, Inc. (NYSE:DT) platform and has been adding customers rapidly in the past few years.

Major hedge funds have expressed confidence in the business model of Dynatrace, Inc. (NYSE:DT) over the past few months. California-based investment firm HMI Capital is a leading shareholder in Dynatrace, Inc. (NYSE:DT) with 5 million shares worth more than $357 million.

Here is what Polen Capital has to say about Dynatrace, Inc. (NYSE:DT) in its Q3 2021 investor letter:

“Dynatrace outperformed during the quarter as the company reported earnings results that handily beat expectations. The company continues to increase its customer base and has expanded net revenues with existing customers.”

10. RingCentral, Inc. (NYSE:RNG)

Number of Hedge Fund Holders: 48

RingCentral, Inc. (NYSE:RNG) offers investors an attractive entry point in the high growth cloud sector that has seen share price skyrocket in recent years. Compared to peers, RingCentral, Inc. (NYSE:RNG) is cheaper since the stock is trading at near a 52-week low after the departure of high-profile executives from the firm. However, with RingCentral, Inc. (NYSE:RNG) slated to grow revenues by over 30% for the next few years, solid legacy partnerships, and compelling products, analysts recommend buying the stock aggressively during the sell-off.

Evercore ISI analyst Peter Levine recently named RingCentral, Inc. (NYSE:RNG) as a favorite rebound idea for 2022 and said the stock was valued at below pre-pandemic levels with a favorable growth profile and a “disciplined approach to profitability”. The analyst has an Outperform rating on RingCentral, Inc. (NYSE:RNG) stock with a price target of $275.

Like Microsoft Corporation (NASDAQ:MSFT) and Salesforce.com, Inc. (NYSE:CRM), RingCentral, Inc. (NYSE:RNG) remained a popular tech stock among hedge funds.

Here is what Baron Opportunity Fund has to say about RingCentral, Inc. (NYSE:RNG) in its Q2 2021 investor letter:

“RingCentral, Inc. (NYSE:RNG) has been a three-year portfolio holding and remains a leader in the cloud unified communications-as-a-service (UCaaS) space, which includes voice, video, messaging, and call center services. But after posting its third quarter in a row of accelerating revenue growth in the first quarter, RingCentral’s shares began to sell off on fears around heightened competition with both Microsoft Teams, of which RingCentral is a partner, and with Zoom Communications, a former partner who has launched its own voice communications offering. Shares sold off further during the period with the rotation out of secular growth names into cyclicals. We used the pullback in the shares to add significantly to our position given RingCentral’s best-in-class UCaaS technology, including five 9’s contractual service commitments (fully operational 99.999% of the time) for voice, which is orders of magnitude above its competitors; presence in roughly 40 countries; data governance and security requirements; number portability with all the relevant domestic and international carriers; and positioning as the Gartner Magic Quadrant UCaaS Leader. The UCaaS market is still quite early in its adoption curve, with only about 3% penetration of the roughly 400 million existing business landline seats in operation today. We believe RingCentral is in a solid position to capture meaningful share of this market, with its exclusive partnerships with legacy landline players like Avaya, Atos, and Alcatel, which effectively gives it a “hunting license” for about half of those 400 million legacy seats, leveraging joint go-to-market efforts with each partner. We remain confident that RingCentral, Inc. (NYSE:RNG) is well positioned to achieve at least 30% top-line growth for years to come, along with steadily improving operating margins and free cash flow generation.”

9. Cloudflare, Inc. (NYSE:NET)

Number of Hedge Fund Holders: 50

Cloudflare, Inc. (NYSE:NET) has grown revenue by 50% consistently over the past five years, a feat that makes the firm stand a mile apart from the competition in the cloud sector. This consistency is primarily based on the incredible popularity of the Content Delivery Network of Cloudflare, Inc. (NYSE:NET), the preferred cloud product for major retailers and commercial enterprises for fast and efficient processing. Cloudflare, Inc. (NYSE:NET) looks set to continue this trend in 2022.

Hedge funds have also backed Cloudflare, Inc. (NYSE:NET) to perform well in 2022. Chicago-based investment firm Citadel Investment Group is a leading shareholder in Cloudflare, Inc. (NYSE:NET) with 1.1 million shares worth more than $129 million.

In its Q4 2020 investor letter, Alger Mid Cap Focus Fund, an asset management firm, highlighted a few stocks and Cloudflare, Inc. (NYSE:NET) was one of them. Here is what the fund said:

“Cloudflare, Inc. (NYSE:NET) provides a broad range of network services to businesses of all sizes across the world. Cloudflare’s intelligent global network spans more than 200 cities in over 100 countries. It offers network security, performance and reliability to a growing portion of global web traffic. Today. over 15% of global internet requests go through Cloudflare. Cloudflare’s serverless network design allows this global network to be a key component layer as new developments for edge cornputing. 5G and Internet of Things increase the importance of secure. reliable edge networks. Cloudflare stock outperformed in the fourth quarter following the announcement of Cloudflare One, a cloud-bas. network-as-a-service platform designed to replace the traditional enterprise network infrastructure. The Cloudflare One solution merges existing Cloudflare access and security solutions along with new enterprise-specific features into a unified Zero Trust network that can be managed through a single “pane of glass.” or display screen. With the rapid shift to remote work caused by the pandemic, this product increases Cloudflare’s potential for winning business from enterprise customers seeking to adapt to this new business environment.

While Cloudflare One adoption is still early. Cloudflare, Inc. (NYSE:NET) has already started to demonstrate an improved ability to sell to large customers. When discussing its third quarter results. Cloudflare said that it is continuing to sign up larger enterprise customers. including its first client to generate more than $10 million in annual recurring revenue. Cloudflare has just started to better monetize its more than 100.000 paying customer base. which along with continued product innovation, gives the company strong growth potential.”

8. Oracle Corporation (NYSE:ORCL)

Number of Hedge Fund Holders: 56

Oracle Corporation (NYSE:ORCL) stock has registered a sharp decline since the company announced that it would be entering the health sector with the purchase of IT firm Cerner for $28 billion in late December 2021. Monness Crespi analyst Brian White has urged investors to buy the stock amid the sell-off, noting that Oracle Corporation (NYSE:ORCL) is a ‘high-quality value play” that looks set to cash in on the cloud transformation sweeping the world. The analyst has a Buy rating and a $126 price target on the shares.

Oracle Corporation (NYSE:ORCL) has been a hedge fund favorite for many years. At the end of the third quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $3.4 billion in Oracle Corporation (NYSE:ORCL), up from 55 in the preceding quarter worth $2.8 billion.

Here is what Ariel Investments has to say about Oracle Corporation (NYSE:ORCL) in its Q1 2021 investor letter:

“A temporary factor might be a downturn in the high-yield bond market driving up LBO financing costs for the decline in 2021 GAAP revenue for Oracle Corporation (ORCL) due to a change in accounting methods. In all these examples, stock prices were driven well-below our calculations of intrinsic value. We invested in each company with good outcomes. Later, we will offer instances when this strategy is not successful.”

7. Anaplan, Inc. (NYSE:PLAN)

Number of Hedge Fund Holders: 61

Anaplan, Inc. (NYSE:PLAN) owns and runs a cloud-based connected planning platform. The platform provides real-time data calculations and operates as a single source of information for business planning centered around these calculations. Anaplan, Inc. (NYSE:PLAN) services are utilized in industries such as finance, sales, and supply chain, among others. Morgan Stanley analyst Stan Zlotsky has an Equal Weight rating on Anaplan, Inc. (NYSE:PLAN) stock with a price target of $55.

Evercore ISI recently named Anaplan, Inc. (NYSE:PLAN) among a list of stocks poised to bounce back in 2022 after underperforming in 2021. The investment advisory cited new customer additions and a new CFO as some of the reasons why the 2022 and 2023 revenue estimate for Anaplan, Inc. (NYSE:PLAN) looked “conservative”.

Here is what Alger has to say about Anaplan, Inc. (NYSE:PLAN) in its Q1 2021 investor letter:

“Anaplan, Inc. (NYSE:PLAN) was among the top detractors from performance. Anaplan is a leading provider of cloud-based business planning software. Anaplan’s software platform aims to solve the most complex planning needs of large global enterprises across various business lines. Unlike traditional business planning software, which is often rigid, siloed and opaque, Anaplan’s platform is designed to enable broader enterprise participation and better workforce collaboration during the business planning process. Through better planning, large enterprises can more effectively allocate resources to cut costs and generate revenue. Today Anaplan has over 1,600 customers across a variety of end markets and business use cases.

Anaplan, Inc. (NYSE:PLAN) shares underperformed in the first quarter as part of a broader sector rotation as high-growth software stocks fell out of favor relative to more cyclically exposed investment opportunities. We believe Anaplan’s focus on growth over near-term profit generation negatively impacts the company’s stock in a rising interest rate environment.

Fundamentally, Anaplan had strong fourth quarter earnings result, with the company seeing an acceleration of billings growth and a strong demand pipeline as companies realize the need for a more flexible digital planning solution.”

6. Okta, Inc. (NASDAQ:OKTA)

Number of Hedge Fund Holders: 62

Wells Fargo analyst Andrew Nowinski recently initiated coverage of Okta, Inc. (NASDAQ:OKTA) stock with an Overweight rating and a price target of $275, underlining that the firm had the “most comprehensive identity security platform” on the market. The analyst backed Okta, Inc. (NASDAQ:OKTA) to retail revenue growth at above 35% for the coming years based on the solidity of the cloud security product.

Okta, Inc. (NASDAQ:OKTA) remains on the radar of elite hedge funds. At the end of the third quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Okta, Inc. (NASDAQ:OKTA), up from 57 in the preceding quarter worth $2 billion.

Alongside Microsoft Corporation (NASDAQ:MSFT), Salesforce.com, Inc. (NYSE:CRM), and Twilio Inc. (NYSE:TWLO), Okta, Inc. (NASDAQ:OKTA) is one of the stocks attracting the attention of elite investors.

Click to continue reading and see 5 Best Cloud Stocks To Buy Now.

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Disclosure. None. 13 Best Cloud Stocks To Buy Now is originally published on Insider Monkey.