Rapid digitization has favored the cloud computing sector greatly. The COVID-19 pandemic and the remote working culture it ushered in have been major driving forces. Resources such as databases, remote servers, and storage centers have replaced expensive on-premises infrastructure. Companies have adopted cloud computing rapidly thanks to its scalability, cost-effectiveness, and efficiency, and the migration from expensive on-premises IT infrastructure to on-demand services has been a major boon for companies that offer these services.
Analysts believe the demand for cloud infrastructure will continue increasing because the remote working culture is expected to continue even after the pandemic. Interestingly, cloud computing is evolving and now many applications are being built exclusively for the cloud. Gartner predicts that the portion of enterprise IT spending on public cloud computing will expand 18.4% in 2021 to $304.9 billion. Further, cloud computing still has much untapped potential, and investors can capitalize on it by picking fundamentally sound cloud stocks.
Four cloud stocks that Wall Street analysts believe will surge by more than 20% are Twilio Inc. (TWLO), DocuSign, Inc. (DOCU), Splunk Inc. (SPLK), and Zscaler, Inc. (ZS).
Click here to check out our Software Industry Report for 2021
Twilio Inc. (TWLO)
TWLO offers a cloud communications platform that empowers developers to build, scale, and operate customer engagement within software applications in the United States and globally. The company operates through a pay-as-you-go service.
Omnicell, a leading provider of medication management solutions, has announced that its EnlivenHealth™ division is collaborating with TWLO to accelerate the creation and launch of breakthrough patient engagement solutions for transforming the practice and business of retail pharmacy.
Of 24 analysts that have rated TWLO, 22 rated it Buy and one rated it Hold. Also, the $505.27 consensus price target for the stock indicates a potential 37.4% upside.
During the fourth quarter, ended December 31, 2020, TWLO’s revenue surged 65% year-over-year to $548.1 million. Its dollar-based net expansion rate for revenue was 139%. Political traffic’s contribution to revenue was $22.7 million. The company had more than 221,000 active customer accounts at the end of December 2020. Its loss per share for the quarter was $1.13 compared to $0.66 in the same period last year.
A consensus revenue estimate for the quarter ended March 31, 2021 was $534.92 million, signaling 46.6% year-over-year growth. Its EPS for the quarter is expected to grow at the rate of 20.5% per annum over the next five years.
TWLO has climbed 227.5% over the past year to close Friday’s trading session at $367.80. Over the past six months, the stock rose 31.8%.
DocuSign, Inc. (DOCU)
DOCU offers cloud-based transaction products and services in the United States. The company offers an e-signature solution for businesses to digitally prepare, execute, and act on agreements. Large enterprises, sole proprietorships, small- to medium-sized businesses, professionals, and individuals are DOCU’s clients.
CherryRoad Technologies Inc., a leading integrator of public-sector software and digital technology solutions, has announced a strategic partnership with DOCU to implement DocuSign eSignature and DocuSign CLM (Contract Lifecycle Management) solutions.
Of the 13 covering analysts, 12 have rated DOCU a Buy, while one has rated it Hold. Also, the $271.75 consensus price target indicates a potential 21.9% upside.
DOCU’s revenue for the fourth quarter ended January 31 was $430.9 million, indicating a 57% year-over-year increase. Its subscription revenue surged 59% over the year to $410.2 million. Its billings climbed 46% year-over-year to $534.9 million. Its loss per share was $0.38 compared to $0.26 posted in the prior-year period, and its free cash flow at the end of the quarter was $44.0 million.
Analysts expect DOCU’s revenue for the year ending January 31, 2022 to be $1.97 billion, representing a 35.8% year-over-year rise. Its EPS is likely to grow at the rate of 38.6% per annum over the next five years.
DOCU ended Friday’s trading session at $222.94, rallying 112.8% over the past year. During the past six months, the stock climbed 10.2%.
Splunk Inc. (SPLK)
SPLK software and cloud services enable companies to search, monitor, analyze and visualize machine-generated big data generated by websites, applications, servers, networks, sensors, and mobile devices.
Of 21 analysts that have rated SPLK, 12 rated it Buy. Also, the $195.35 consensus price target indicates a potential 54.5 % upside.
SPLK has appointed Teresa Carlson to the newly created role of President and Chief Growth Officer, with effect from April 19.Carlson will be closely involved with Splunk’s sales, customer success, and marketing leaders to align and drive SPLK’s business transformations across its go-to-market business segments.
During the fourth quarter, ended January 31, 2021, SPLK’s Annual Recurring Revenue soared 41% year-over-year to $2.3 billion. The company’s Cloud ARR surged 83% over the year to $810 billion. Its percentage of cloud revenue to total software bookings was 51%.
A consensus revenue estimate for the first quarter ended April 30, 2021 stands at $491.3 million, signaling an 11% year-over-year decline. Its loss for the quarter is expected to expand 25% year-over-year to $0.07.
SPLK declined 9.9% over the past year to close Friday’s trading session at $126.8. Over the past six months, the stock lost 36.2%.
Zscaler, Inc. (ZS)
ZS operates as a cloud security company globally. The company develops a software-as-a-service-based security platform that secures access for users and devices to applications and services. It serves sectors that include airline and transportation, consumer goods and retail, financial service, healthcare, and manufacturing.
Of 20 analysts that have rated ZS, 15 rated it Buy. Also, the $236.75 consensus price target indicates a 26.2% potential upside.
ZS has entered an acquisition agreement to buy Trustdome, a Cloud Infrastructure Entitlement Management (CIEM) player for an undisclosed amount. The acquisition will help ZS’ foray into the Israeli market. It will also strengthen its Cloud Security Posture Management (CSPM) platform.
ZS’ revenue for the second quarter, ended January 31,surged 55% year-over-year to $157 million. Its calculated billings grew 71% year-over-year to $232 million, while its deferred revenue climbed 60% over the year to $446.8 million. Its loss per share was $0.50 compared to $0.23 posted in the same period last year.
Analysts expect ZS’ revenue for the quarter ending July 31 to be $173. 9 million, representing 38.1% year-over-year growth. Its EPS is likely to grow at the rate of 60.2% per annum over the next five years.
ZS ended Friday’s trading session at $187.64, surging 179.7% over the past year. The stock soared 38.2%, during the past six months.
Click here to check out our Software Industry Report for 2021
TWLO shares were trading at $367.65 per share on Monday morning, down $0.15 (-0.04%). Year-to-date, TWLO has gained 8.61%, versus a 12.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More…
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