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4 Stocks to Gain Traction From Cloud Computing Revolution

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Cloud computing’s transformation of today’s hyper-competitive business world is nothing less than revolutionary. Cloud computing technology not only changes the way enterprises conduct business but also influences customer demand for faster and more efficient systems and applications.

Therefore, cloud computing has become indispensable to almost every industry, especially information technology. Thus, this demand has roused investors’ interest in cloud computing-focused stocks.

Upbeat Outlook for the Cloud Computing Market

Per MarketsandMarkets data, the global cloud computing market is poised to achieve a value of $623.3 billion by 2023 from $272 billion in 2018, witnessing a compounded annual growth rate (CAGR) of 18% during the forecast period.

The widespread adoption of cloud systems and applications by businesses across the globe is a major catalyst for the cloud computing market today.

Hybrid Cloud Boosts Cloud Computing Market

Delving deeper into the cloud computing industry and considering the factors leading to its constant growth, the hybrid cloud segment seems to have emerged as the leading contributor. Hybrid cloud has found its way into the industries, namely banking, finance, insurance, healthcare and even government operations.

In fact, several cloud vendors are working hard to strengthen their foothold in the hybrid cloud space through new products and acquisitions. Alphabet’s (GOOGL - Free Report) Google Cloud launched its new hybrid cloud product called Anthos recently. The acquisition of Red Hat (RHT - Free Report) by International Business Machines (IBM - Free Report) in the fourth quarter of 2018 is another such example.

Cloud Computing is Transforming Businesses

Another driving force in the industry is the growing number of companies shifting their operations to cloud platforms. Cloud computing is transforming businesses by improving their operations and customer support through its easy-to-process set of applications. This is the result of its revamped software architectures and improved business computing.

Higher operational efficiency ramped up productivity for businesses while customer support became easier because cloud platform facilitates employees access across the globe to the same information anytime.

This also helps businesses save on infrastructure. Many start-ups today are opting for cloud technology to save on office space and overhead costs. Therefore, companies have the option to expand without worrying about infrastructure-related expenditures. All they need to do is contact a cloud services provider.

Secondly, a cloud computing system provides secure data storage, offering end-to-end security to clients. The multiple layers of security and constant upgrades protect systems against data breach.

Pending Contract to Further Drive the Cloud Computing Market

Lastly, the U.S. Defense department’s pending $10-billion cloud computing contract called Joint Enterprise Defense Infrastructure (JEDI) could give this industry a significant push. The Pentagon is seeking a cloud computing company that would host its information and help it make data-driven decisions at super fast speed. At present, Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) remain the top contenders for clinching this deal.

However, this project is likely to create substantial opportunities for companies that are engaged in helping organizations shift their operations to the cloud.  

4 Stocks to Benefit

Given the encouraging scope of the cloud computing industry, it would be prudent to invest in some related stocks of companies that are contributing significantly to the space with their innovations and strategies.

We have selected four such best bets that are worth considering. Each stock carries a Zacks Rank #2 (Buy).

Amazon.com, Inc. is currently competing fiercely with Microsoft for the U.S. Defense Department’s cloud contract. The company remains a definite winner in the cloud computing space. Amazon Web Services (AWS), which offers on-demand cloud computing services, is a major growth driver for the stock. AWS captured about 32% of the cloud computing market share in 2018, outpacing Microsoft, IBM and Alphabet. (Read more)

Amazon’s expected earnings growth rate for the current year is 32.4% compared with the Zacks Internet – Commerce industry’s projected decline of 1.7%. Its Zacks Consensus Estimate for current-year earnings has risen 0.9% in the past 30 days. The company’s stock price has outperformed the Electronic Commerce Market over the past one-year period (+28.9% vs +6.7%). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Intuit Inc. (INTU - Free Report) has used its cloud computing products, QuickBooks, to increase profitability and productivity of businesses. QuickBooks is a cloud-based accounting solution that mostly caters to small- and medium-sized companies.

Intuit’s expected earnings growth rate for the current year is 17.1% compared with the Zacks Computer – Software industry’s projected rise of 7.9%. Its Zacks Consensus Estimate for current-year earnings has risen 0.5% in the past 30 days. The company’s stock price has outperformed the Computer Software Market over the past one-year period (+51% vs +25.9%).

 

Akamai Technologies, Inc. (AKAM - Free Report) is a provider of content delivery network services for mostly software and media companies. In other words, these businesses use Akamai’s cloud infrastructure and services to supply their content instead of using their own servers for the purpose.

Akamai Technologies’ expected earnings growth rate for the current year is 12.4% compared with the Zacks Internet – Services industry’s projected rise of 4.7%. Its Zacks Consensus Estimate for current-year earnings has risen 1.2% in the past 60 days. The company’s stock price has outperformed the Internet Services Market over the past one-year period (+5.6% vs +1.4%).

 

Cisco Systems, Inc. (CSCO - Free Report) recently released a cloud-services program called Cisco Cloud ACI on its software-defined networking software which will allow customers to manage applications that are run in the data center or on Amazon Web Service cloud. Cisco has also expanded its joint cloud-development activities with Google, in a bid to firmly integrate Anthos with its data center-technologies.

Cisco Systems’ expected earnings growth rate for the current year is 17.7% compared with the Zacks Computer – Networking industry’s projected decline of 0.3%. Its Zacks Consensus Estimate for current-year earnings has risen 1.3% in the past 60 days. The company’s stock price has outperformed the Computer Network Market over the past one-year period (+29.3% vs +27.1%).

 

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