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5 Stocks to Buy as Cloud Computing Adoption Accelerates

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The pandemic-induced trend of staying and working from home in 2020 created an urgent need to enable remote-working facility. This led many companies to adopt cloud computing solutions for the first time. However, digital transformation was not new to the global economy. The pandemic only accelerated the adoption.

Digital transformation will be a key factor boosting the cloud computing space. Per a Research and Markets report, the global cloud computing market size is expected to rise from $371.4 billion in 2020 to $832.1 billion by 2025, at a CAGR of 17.5%. Hence, the trend is here to stay and here’s why --

Cloud Computing is Here to Stay

The pandemic-induced remote working has shown companies the convenience of digital transformation. Not only can employees access their office devices from anywhere,they can use cloud collaboration platforms for communicating with colleagues. For companies, this has increased productivity and reduced workspace expenses.

The significance of cloud will keep growing in the post-pandemic period, thanks to its features, i.e., cost-efficient services, scalability, and flexibility to businesses. Moreover, rapid digitalization in the last year has changed the work environment and lifestyle. Integration of cloud computing with AI, big data and IoT will help businesses attain new heights of innovation.

Per a Forrester’s Predictions 2021 report, cloud will power how companies adapt to the “new, unstable normal” in 2021. The global public cloud infrastructure market is expected to grow 35% to $120 billion in 2021. Two major reasons behind this strong growth are-- cloud computing will help companies globally accelerate recovery in 2021. Also, people are unsure about how far into 2021 will companies keep remote working orders active and avoid travelling for work.

On Feb 9, cloud stocks hit a record-high for the fifth day in a row, while the cloud computing ETF (SKYY) notched an all-time high the day before. According to Synergy Research Group report, enterprise spending on cloud infrastructure services in the fourth quarter of 2020 was just crossed$37 billion, a 35% jump from the same quarter the year before. Fourth-quarter spending was$4 billion higher than the previous quarter and Microsoft Corporation (MSFT - Free Report) hit the milestone of achieving a 20% worldwide market share. Both Microsoft and Amazon continue to account for more than half of the global cloud infrastructure services market.

Our Top 5 Choices

The United States has emerged as the most mature market in terms of cloud computing service adoption. Presence of several technology giants with advanced IT infrastructure and availability of technical expertise is a primefactor for the boom in cloud computing in America.

In the coming years, more small-scale businesses, retail and consumer goods companies will adopt cloud computing, big data analytics, digital stores and social networks. Given such positives, we have shortlisted five stocks that are poised to grow and will return well on investment. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Microsoft offers Azure, a cloud computing service,for building, testing, deploying, and managing applications and services through Microsoft-managed data centers. The company’s expected earnings growth rate for the current year is 27.4% compared with the Zacks Computer - Software industry’s projected earnings growth of 3.3%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 9.1% upward over the past 60 days.

Workday, Inc. (WDAY - Free Report) provides enterprise cloud applications. The company’s expected earnings growth rate for the current year is 42.6% compared with the Zacks Internet - Software industry’s projected earnings growth of 9.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 1.1% upward over the past 60 days.

Apple Inc. (AAPL - Free Report) offers iCloud, a cloud storage and cloud computing service. The company’s expected earnings growth rate for the current year is 36.3% compared with the Zacks Computer - Mini computers industry’s projected earnings growth of 26.7%. The Zacks Consensus Estimate for the company’s next-quarter earnings has been revised 11.5% upward over the past 60 days.

CrowdStrike Holdings, Inc. (CRWD - Free Report) provides cloud-delivered solutions for next-generation endpoint protection. The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Internet - Software industry’s projected earnings growth of 9.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 4.6% upward over the past 60 days.

Anaplan, Inc. (PLAN - Free Report) provides a cloud-based connected planning platform to connect organizations and people. The company’s expected earnings growth rate for the current year is 31.8% compared with the Zacks Internet - Software industry’s estimated earnings growth of 9.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 11.8% upward over the past 90 days.

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