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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:
Adobe Systems is a provider of graphic design, publishing, and imaging software for Web and print production. The company’s main offering is its “Creative Cloud,” which is a software-as-a-service (SaaS) product that allows users to access all of Adobe’s tools at one monthly price. The stock is currently a Zacks Rank #1 (Strong Buy).
Adobe has had a great year, but shares recently exploded when company management released optimistic guidance for its next fiscal year. In response, we’ve seen 12 positive estimate revisions for the period, and our consensus earnings estimate is now 31 cents higher.
Based on these latest figures, we now expect to see Adobe post EPS growth of 30% next year, and that’s on top of the 39% growth that’s expected this year. Current projections are also calling for sales to improve by around 20%, both this year and next year. Furthermore, the company is growing its cash flow by 48%, and management is generating a whopping $3.21 in cash per share, outpacing its industry average of just $0.68 per share.
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 75% 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 30% and sales growth of 26% 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).
3. Red Hat
Red Hat is a leading provider of open-source software and enterprise IT solutions, including cloud computing. The company has a strategic partnership with Amazon’s (AMZN - Free Report) Web Services unit and is rapidly growing its cloud offerings. After another impressive bullish run, the stock is currently sporting a Zacks Rank #2 (Buy).
Red Hat has met or surpassed earnings estimates in every quarter that we have tracked the company, dating all the way back to early-2014. This year, the firm is looking to grow sales and earnings by around 20%. Furthermore, management is generating an impressive $2.29 in cash per share. Red Hat is also growing its cash flow by nearly 19% right now. And with shares continuously testing new 10-year highs, RHT has emerged as an interesting momentum pick recently.
Bottom Line
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!
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
Image: Bigstock
3 Cloud Stocks to Buy Right Now
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. Adobe Systems (ADBE - Free Report)
Adobe Systems is a provider of graphic design, publishing, and imaging software for Web and print production. The company’s main offering is its “Creative Cloud,” which is a software-as-a-service (SaaS) product that allows users to access all of Adobe’s tools at one monthly price. The stock is currently a Zacks Rank #1 (Strong Buy).
Adobe has had a great year, but shares recently exploded when company management released optimistic guidance for its next fiscal year. In response, we’ve seen 12 positive estimate revisions for the period, and our consensus earnings estimate is now 31 cents higher.
Based on these latest figures, we now expect to see Adobe post EPS growth of 30% next year, and that’s on top of the 39% growth that’s expected this year. Current projections are also calling for sales to improve by around 20%, both this year and next year. Furthermore, the company is growing its cash flow by 48%, and management is generating a whopping $3.21 in cash per share, outpacing its industry average of just $0.68 per share.
2. AppFolio (APPF - Free Report)
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 75% 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 30% and sales growth of 26% 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).
3. Red Hat
Red Hat is a leading provider of open-source software and enterprise IT solutions, including cloud computing. The company has a strategic partnership with Amazon’s (AMZN - Free Report) Web Services unit and is rapidly growing its cloud offerings. After another impressive bullish run, the stock is currently sporting a Zacks Rank #2 (Buy).
Red Hat has met or surpassed earnings estimates in every quarter that we have tracked the company, dating all the way back to early-2014. This year, the firm is looking to grow sales and earnings by around 20%. Furthermore, management is generating an impressive $2.29 in cash per share. Red Hat is also growing its cash flow by nearly 19% right now. And with shares continuously testing new 10-year highs, RHT has emerged as an interesting momentum pick recently.
Bottom Line
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!
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research. It's not the one you think.
See This Ticker Free >>