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Cloud was an emerging concept even before the virus-led lockdown as companies were discarding their own servers and shifting to the cost-effective renting model, giving huge business to mega cloud owners like Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) . The coronavirus-led lockdowns brightened the appeal for the sector as there has been a transition to work-and-learn-from-home.
Cloud ETFs like WisdomTree Cloud Computing Fund WCLD (up more than 25% past month), Global X Cloud Computing ETF (CLOU - Free Report) (up 25.4%) and First Trust Cloud Computing ETF (SKYY - Free Report) (up about 23%) have beaten the S&P 500 (up about 21.6%) past month.
Shopify Inc. (SHOP - Free Report) will report on May 6. This Zacks Rank #2 (Buy) stock has an Earnings ESP of +16.08%. Positive ESP suggests that analysts have recently become bullish on the company's earnings prospects.
Zoom Video Communications Inc. ZMoperates in this segment. Zacks Rank #1 (Strong Buy) Zoom is likely to report next on Jun 4. Zoom has a positive ESP of 3.96%. Rank #2 Okta Inc. (OKTA - Free Report) is likely to report on Jun 4. Okta’s ESP is +5.17%.
Zacks Rank #2 Five9 Inc. (FIVN - Free Report) (expected report date May 4) and DocuSign Inc. (DOCU - Free Report) (Jun 4) each has a 0.00% ESP. Rank #3 stocks Qualys Inc. (QLYS - Free Report) (expected to report on May 7) and Cloudflare, Inc.NET (May 7) have a 0.00% ESP.
Not all cloud companies look promising in terms of ESP. Things are a bit disappointing for the big names. Zacks Rank #3 (Hold) major could owners Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet Inc. (GOOGL - Free Report) are likely to report on Apr 30, Apr 29 and Apr 28 respectively. Amazon, Microsoft and Alphabet have a negative earnings ESP of 1.67%, 1.42%, and 5.19%. respectively.
Zacks Rank #3 Oracle Corporation (ORCL - Free Report) (likely to report on Jun 17) has an earnings ESP of negative 1.51% while Zacks Rank #2 Akamai Technologies Inc. (AKAM - Free Report) has an earnings ESP of negative 0.75% (to be reported on Apr 28).
Impact on ETFs
Overall, the impact on ETFs is likely to be mixed. If the above-mentioned ESPs are any guide, then SKYY is likely to lag other cloud ETFs like WCLD and CLOU. This is because SKYY is concentrated on big cloud operators that primarily have negative ESPs.
On the other hand, WCLD has less company-specific risks as no stock accounts for more than 3.03% of the portfolio. It has notable exposure to better ESP-holders like Zoom, Okta, Shopify, Five9, Qualys and Cloudflare.
CLOU is likely to have a mixed impact. While Shopify’s presence at the top spot is a plus, Netflix’s mixed Q1 earnings, and negative ESPs of Zscalerand Akamai Technologies could keep the fund’s performance at check (read: Stay-at-Home Boosts Netflix Q1 Subscribers: ETFs to Buy).
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What Will Earnings Bring for Cloud ETFs?
Cloud was an emerging concept even before the virus-led lockdown as companies were discarding their own servers and shifting to the cost-effective renting model, giving huge business to mega cloud owners like Amazon (AMZN - Free Report) and Microsoft (MSFT - Free Report) . The coronavirus-led lockdowns brightened the appeal for the sector as there has been a transition to work-and-learn-from-home.
Cloud ETFs like WisdomTree Cloud Computing Fund WCLD (up more than 25% past month), Global X Cloud Computing ETF (CLOU - Free Report) (up 25.4%) and First Trust Cloud Computing ETF (SKYY - Free Report) (up about 23%) have beaten the S&P 500 (up about 21.6%) past month.
Against this scenario, let’s take a look at what’s in store for cloud stocks this reporting season and how cloud ETFs can be impacted (read: Why Cloud Computing Stocks & ETFs are COVID-19's Biggest Winners).
Inside the Expected Earnings Performance
Shopify Inc. (SHOP - Free Report) will report on May 6. This Zacks Rank #2 (Buy) stock has an Earnings ESP of +16.08%. Positive ESP suggests that analysts have recently become bullish on the company's earnings prospects.
Zoom Video Communications Inc. ZM operates in this segment. Zacks Rank #1 (Strong Buy) Zoom is likely to report next on Jun 4. Zoom has a positive ESP of 3.96%. Rank #2 Okta Inc. (OKTA - Free Report) is likely to report on Jun 4. Okta’s ESP is +5.17%.
Zacks Rank #2 Five9 Inc. (FIVN - Free Report) (expected report date May 4) and DocuSign Inc. (DOCU - Free Report) (Jun 4) each has a 0.00% ESP. Rank #3 stocks Qualys Inc. (QLYS - Free Report) (expected to report on May 7) and Cloudflare, Inc. NET (May 7) have a 0.00% ESP.
Not all cloud companies look promising in terms of ESP. Things are a bit disappointing for the big names. Zacks Rank #3 (Hold) major could owners Amazon (AMZN - Free Report) , Microsoft (MSFT - Free Report) and Alphabet Inc. (GOOGL - Free Report) are likely to report on Apr 30, Apr 29 and Apr 28 respectively. Amazon, Microsoft and Alphabet have a negative earnings ESP of 1.67%, 1.42%, and 5.19%. respectively.
Zacks Rank #3 Oracle Corporation (ORCL - Free Report) (likely to report on Jun 17) has an earnings ESP of negative 1.51% while Zacks Rank #2 Akamai Technologies Inc. (AKAM - Free Report) has an earnings ESP of negative 0.75% (to be reported on Apr 28).
Impact on ETFs
Overall, the impact on ETFs is likely to be mixed. If the above-mentioned ESPs are any guide, then SKYY is likely to lag other cloud ETFs like WCLD and CLOU. This is because SKYY is concentrated on big cloud operators that primarily have negative ESPs.
On the other hand, WCLD has less company-specific risks as no stock accounts for more than 3.03% of the portfolio. It has notable exposure to better ESP-holders like Zoom, Okta, Shopify, Five9, Qualys and Cloudflare.
CLOU is likely to have a mixed impact. While Shopify’s presence at the top spot is a plus, Netflix’s mixed Q1 earnings, and negative ESPs of Zscalerand Akamai Technologies could keep the fund’s performance at check (read: Stay-at-Home Boosts Netflix Q1 Subscribers: ETFs to Buy).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>