Are These The Best Cloud Stocks To Buy After The Pullback Since September?
Cloud stocks have set themselves apart from the broader tech industry this year. Since the COVID-19 pandemic, many companies have ramped up their corporate spending on cloud computing and digital transformation in order to stay in business. This benefits many software-as-a-service (SaaS), providers. Top cloud stocks in the stock market have rallied sharply since the onset of the pandemic until recently. There’s no doubt cloud computing has become more sophisticated by the year. However, with the recent rebound in many cloud stocks this month after a big sell-off in September, should investors surf along the bullish waves?
For the coming decade, the cloud computing industry is likely to be among the biggest investment themes. That’s in addition to the red-hot electric vehicle industry we see in the stock market today. To see things from a big picture, reports suggest that between the current year and fiscal year 2025, the industry may grow at a compound annual growth rate (CAGR) of 17.5%. With such a high positive growth trajectory, it does make sense for investors to start looking for top cloud stocks to buy for their long-term portfolio. I’m not sure about you, but I’ll definitely consider it when there are corrections along the way.
How To Find The Best Cloud Stocks In The Industry?
Cloud computing services are new growth engines for big techs like Amazon (AMZN Stock Report) and Microsoft (MSFT Stock Report). Essentially, these tech giants rent out their powerful computers and software platforms for other companies to run their computing workloads remotely. What that means is that many companies do not need to spend so much upfront for computing infrastructure. Industry leader Salesforce.com (CRM Stock Report) has been offering subscription-based software-as-a-service (SaaS) even before the term cloud computing was coined. Unsurprisingly, the big tech names would typically pop up first when companies are looking for cloud vendors to work with.
Of course, Investors who are looking for a safe bet could consider the above companies. But are the most established companies necessarily the best cloud stocks to buy? What if you are looking for the next Salesforce or Amazon Web Services in the making? If so, you might want to consider these smaller and high potential cloud companies to invest in. That could just make you win big in the stock market over the next decade.
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Top Cloud Stocks To Buy [Or Sell] Right Now: Fastly
Fastly is making big moves again this week. If you have been following our feeds closely on StockMarket.com, you may notice that the company’s share price has risen by more than 200% since we covered it in May. Shares of Fastly (FSLY Stock Report) jumped on Wednesday, rising to a high of $120.33 per share by closing nearly 20%, making it one the best performing cloud stocks on Wednesday. The surge in FSLY stock appeared to be a bit of a positive overreaction by investors. Why do I say that? Because a major stock price jump like this usually has to do some company-specific news and not macroeconomic news, right? That’s unless…you know something that I don’t.
Also, in recent weeks, investors bid up FSLY stock as it looks less likely that the Trump administration will be able to ban TikTok app downloads. Investors have been paying close attention to this development. That’s because the video-sharing app contributed 12% of Fastly’s revenue, according to the latest quarterly report. Hence, any signs of the video app continuing its service is a catalyst for a breakout in FSLY stock.
A new article on Politico cited a federal judge, who stated that the TikTok app restrictions “likely exceed” President Trump’s legal authority. The article mentioned that TikTok and the Trump administration’s legal teams could meet “no later than Wednesday” for a discussion on the next steps. If it is indeed true that the ban seems unlikely, FSLY stock is likely to continue gaining ground.
Many expect the market to be volatile with elections weeks away and the uncertainty about the recovery of the U.S. economy. This means that Fastly investors, or shareholders of any cloud computing companies, might want to keep a long-term perspective on their investments. As we have said, there has been no company-specific news which drove Fastly’s stock price increase. Perhaps traders were just bidding up the stock in reaction to other news. Now that Fastly is moving so fast, is this the best cloud stock to buy now?
Top Cloud Stocks To Buy [Or Sell] Right Now: Cloudflare
Cloudflare (NET Stock Report) has also been exhibiting some bullish signs after the stock suffered some beating during the September sell-off. Just weeks ago, the shares fell to $32.94 per share at one point. Since then, NET stock has rebounded around 32% in the past month to reach an all-time high this week. Apart from the technical rebound, the reason for its recent strengths could be because of higher brand awareness. That is because Cloudflare provides services to ensure election security. More than half of the U.S. states are using Cloudflare’s Athenian Project to defend election infrastructures from cyberattacks. This covers sensitive information including voter data and election returns.
Also, the company is slated to report its third financial fiscal quarter ended 30th September on November 5 after the closing bell. Cloudflare provides security and content delivery services that shield websites and applications from cyber-attacks. The company’s global footprint, including in China with a partnership with JD.com (JD Stock Report), played a big part in their growth story. To date, the company helps support over 27 million websites, blocking over 72 billion threats per day. The company’s NET stock has climbed 154% year-to-date.
Sales would have been even higher, but Cloudflare wasn’t exactly focusing on growing its client base. Should the company continue to lead with continuous innovation in new growth areas, Cloudflare stock could be one of your best cloud stocks to buy and hold for the decade to come.
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Top Cloud Stocks To Buy [Or Sell] Right Now: Palantir Technologies
Palantir Technologies (PLTR Stock Report), a data analytics company, wasn’t performing so well during the first few days of its IPO. Perhaps you were hoping that the stock could achieve returns similar to blockbuster tech IPOs like Snowflake (SNOW Stock Report). And you must have been disappointed. But you are not alone. However, analysts believe that PLTR stock is still undervalued given the current valuation. Besides, its long-term revenue targets remain attractive. Now that PLTR stock appears to be gaining some momentum, would it be a good time to buy?
Palantir has got some serious names on its founders. Yet, and the nature of the company’s business is pretty secretive, for good reasons. Palantir has gotten a lot more attention than other companies since the IPO. As you may or may not have noticed, Palantir’s revenue has accelerated in the first half of 2020 to 49% well above the 25% growth posted in 2019. Part of that may be due to higher usage during the pandemic by the U.S. Department of Health and Human Services, a client of Palantir.
Palantir doesn’t just have growing revenues. The company appears to be on track to raise contribution margins. That’s important because it shows the actual profitability of the business in comparison to variable expenses. That can give us a better idea of how Palantir’s bottom line will do in the future as the company grows its revenue.
The big question here is for investors where Palantir shares will go from here. This is a solid business with strong relationships with U.S. government agencies. Of course, PLTR stock has not jumped as much as the other recent IPOs. As such, would you be tempted to make a buying move before it goes up more? Palantir is aiming to achieve a revenue of $1 billion in 2020. At a valuation of about 20 times sales, it looks fairly affordable by software standards. Unless you want to compare it to defense companies, in which case PLTR looks expensive. With the company’s strength in data analytics, will you be willing to bet on the company that could protect the country’s interests during a time of geopolitical tensions?
