In a matter of just a few years, “the Cloud” has evolved from the new feature that your grandmother just can’t quite seem to understand to one of the main factors driving growth in the technology sector. Cloud computing is now an essential focus for software-related companies, and cloud stocks have piqued the interest of many tech-focused investors.
New technologies and changing consumer behavior have changed the shape of the technology landscape, and an industry that was once centered on the personal computer has adapted to survive in the world of mobile computing and the Cloud. The markets have been paying attention, and some of the best tech stocks have been those that are either primarily cloud-based companies, or those that have shown growth in their cloud operations.
With this in mind, we’ve highlighted three stocks that are not only showing strong cloud-related activity, but also strong fundamental metrics. Check out these three cloud stocks to buy right now:
1. AppFolio, Inc. (APPF)
AppFolio offers cloud-based software solutions for the property management and legal industries. The company’s AppFolio Property Manager is a leading solution for property management, while its MyCase application is ideal for practitioners and small law firms. The young company has posted its first profits in the last three quarters, surpassing the respective Zacks Consensus Estimates in each.
A company’s first profitable quarters often mean huge profits for investors, and with shares up over 73% this year, that has certainly been the case with AppFolio. Earnings and revenue have also soared this year, but that expansion is expected to continue next year, with current estimates calling for EPS growth of 43% and sales growth of 28% in the upcoming fiscal period. And on top of this, strong earnings estimate revision activity and positive earnings surprises have earned the stock a Zacks Rank #1 (Strong Buy).
2. Splunk Inc. (SPLK)
Splunk provides a software platform, which collects and indexes data and enables users to search, correlate, analyze, monitor and report on this data, all in real time. The company offers a cloud-based version of its core product, Splunk Cloud, and it has integrated with Google’s (GOOGL) cloud platform and Amazon’s (AMZN) AWS system.
Currently, Splunk is a Zacks Rank #2 (Buy). Splunk is also an exciting pick for growth investors and currently rocks an “A” grade in the Growth category of our Style Scores system. The company is expected to expand its earnings by 44% in the current fiscal year. Its earnings are also expected to grow at an annualized rate of 29% over the next three to five years. What’s more, management is expanding its cash flow by 15% right now.
3. Microsoft Corporation (MSFT)
It feels necessary to include one of the industry’s cloud behemoths, and perhaps no platform’s growth has been as impressive as Microsoft’s as of late. In its most recent quarter, Azure revenues grew by a staggering 89%, while Azure premium revenues grew in the triple digits for the 13th consecutive quarter.
Microsoft is currently a Zacks Rank #2 (Buy). The stock is also sporting an “A” grade for Growth. The firm has met or surpassed earnings estimates in six consecutive quarters, and it will hope to extend that streak when it reports again at the end of the month. Current estimates are calling for earnings growth of 4% and revenue growth of 9% this quarter. Meanwhile, MSFT has a PEG ratio of 2.05, so investors are getting a decent price for that respectable earnings growth.
Cloud-based companies have been some of the best performing stocks in the tech sector this year, and these cloud stocks also boast strong fundamental metrics. If you’re looking to add tech stocks to your portfolio right now, this list is probably a good place to start.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Splunk Inc. (SPLK) : Free Stock Analysis Report
AppFolio, Inc. (APPF) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research