Companies continue to remain in distress, with markets gyrating amid a pandemic that has infected more than 900,000 people across the globe. President Trump has warned of a “very, very painful” two weeks ahead for the United States due to rapid spread of the novel coronavirus, which originated in Wuhan, China, and now, has brought global economic growth to a grinding halt.
The stock market began the second quarter in a similar way it ended March, with severe losses. The already-battered bourses saw their worst start to a quarter ever. But there are some bright spots in the markets still.
Primarily, it’s the tech sector that can navigate this gloomy scenario. Most importantly, tech stocks involved in cloud computing are positioned to gain the most as coronavirus increases the number of people working or learning from home, while social distancing measures are imposed to curtail the spread of the COVID-19.
As majority of people are now remotely working or learning, most of the companies need to move a bulk portion of their workloads to the cloud. To top it, consumers have started to shop online due to the lockdown. Thus, any consumer-oriented business needs to have a digital presence built on the cloud in order to survive.
Daniel Ives of Wedbush added that nearly $1 trillion will be spent on cloud over the next decade, which would certainly benefit big cloud players. Let us thus look at some of the top cloud stocks that can make the most in the time of coronavirus.
Amazon – A Dominant Cloud Infrastructure Player
Amazon.com, Inc. (
AMZN - Free Report
) is certainly in the spotlight as it is currently one of the biggest players in the cloud infrastructure market. The Seattle-based company has a solid presence throughout the Internet via Amazon Web Services (“AWS”). And some of big names, including General Motors, Baidu, Spotify, McDonald’s, Twitter and Johnson & Johnson, use AWS.
AWS has over a 30% market share in cloud infrastructure and easily dwarfs rival Azure (17% share) and Google Cloud (6% share). What’s more, social distancing and more people working from home will increase the usage of AWS cloud services.
Amazon, in itself, is benefiting from its Prime program, delivery and logistic system in the e-commerce space. The Zacks Consensus Estimate for its current-year earnings has increased 4.3% over the past 90 days. The company’s expected earnings growth rate for the current quarter and year is 17.2% and 19.2%, respectively. Shares of Amazon have outperformed the
Internet - Commerce
industry so far this year (+3.3% vs -3.1%).
Microsoft Reports Spike in Use of Teams Product
Microsoft Corporation (
MSFT - Free Report
) recently won a $10-billion cloud computing contract from the Pentagon. Such a contract helped it build one of the strongest cloud infrastructure businesses in America. And now the cloud computing business has accelerated given the coronavirus outbreak.
After all, cloud-host enterprise works solutions like Microsoft Teams product has added more than 44 million daily users around the world amid the outbreak, which is more than double of 20 million users that the company had added last November. In fact, in Italy, the number of Teams users soared 775% in just a month due to stay-at-home orders.
It’s worth pointing out that despite the surge in its cloud services, Microsoft to date has reported no significant service disruption. Additionally, the enterprise refresh cycle, new subscription model and promising new products including Azure will continue to generate sizeable cash flows for the company.
The Zacks Consensus Estimate for its current-year earnings has moved up 4.7% over the past 90 days. The company’s expected earnings growth rate for the current and next year is 17.9% and 11.8%, respectively. Shares of Microsoft have outpaced the
Computer - Software
industry over the past six-month period (+11.6% vs +6.3%).
Coronavirus-Related Cloud Computing Tailwinds Buoy Alphabet
Alphabet Inc.’s (
GOOGL - Free Report
) Google Cloud is one of the three major players in the U.S. cloud infrastructure market. Obviously, this will help the company to gain from the coronavirus-related cloud computing tailwinds in the next few quarters, and boost Alphabet’s overall growth trajectory.
By the way, Alphabet’s digital advertisement business remains unscathed from the coronavirus onslaught as consumers continue to engage in YouTube and Google Search. In fact, its focus on innovation, strategic acquisitions and Android OS should continue to generate strong cash flow. Currently, the company’s cash pile measures around $120 billion.
Alphabet’s expected earnings growth rate for the current and next year is 1.8% and 20.8%, respectively. Alphabet has surpassed the
Internet - Services
industry over the past two-year period (+8.2% vs -17.9%).
Alibaba Cloud Helps Medical Professionals Fight Coronavirus
Alibaba Group Holding Limited’s (
BABA - Free Report
) cloud business unit, with the help of AI-led technologies, is providing data on the coronavirus and its diagnosis. Applications developed by the company’s cloud experts, researchers from its subsidiary DAMO Academy is expected to provide the necessary support to medical professionals across the globe in combating the spread of the virus.
The company’s dominance in the mobile commerce market, continued efforts to develop products, retail strength, international growth opportunities and strong financial position are positives.
The Zacks Consensus Estimate for its current-year earnings has risen 1.8% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 10.4% and 31.3%, respectively. Shares of Alibaba have outdone the Internet - Commerce industry over the past six-month period (+10.6% vs +8.4%).
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.