In this segment we focus on the one thing that has changed our lives forever - The Cloud.
Everything we do is stored on a cloud somewhere and with the Covid-19 pandemic the trend to do things remotely whether it's shopping, working or having social gatherings online has accelerated the demand for cloud computing. The cloud computing industry is suppose to hit 1.25 trillion dollars by 2028 with the Small & Medium Businesses contributing to the largest growth in this segment according to Grand Research Inc. According to Fortune Business Insights report, the cloud computing industry in 2021 is approximately USD250 billion and projected to grow to nearly USD800 billion by 2028. Given how significant the expected growth and adoption of cloud computing is going to be specifically in the areas of Infrastructure as a Service (IaaS), Software as a Service (SaaS) & Platform as a Service (PaaS), we have summarised the key companies that are leaders and innovators in this space. Although the 3 largest are Amazon, Google & Microsoft, however only Microsoft makes it into our list as the first 2 stocks are not easily affordable due to its high price points and its potential ROI ( on percentage basis ). The first choice on our list is :
Salesforce.Com Inc (CRM)|Nasdaq|USD291.66|5th November Closing| Medium to Long term Investment
Founded in 1999 and led by Mark Benioff, who previously worked with Oracle for 13 years; is one of the most innovative CEOs in the tech world. Salesforce is ranked 137 in the Fortune 500 list. This software company runs a cloud based customer relationship management platform that enables its customers to connect data across systems, applications & devices in order to sell, service, market and conduct commerce from anywhere. Salesforce is a leader in this space. It has a forecasted earnings growth of 28% per annum over the next 3 years. Although the stock is currently at its peak, this blue chip stock will be able to withstand market volatility due to its healthy future cash flows. Furthermore, it has an average price target of between USD315.00 -375.00 by most analyst. Look to buy when there is a correction. Any price below USD285.00 is a good entry point.
Microsoft Corp(MSFT)|NYSE|USD336.06|5th Nov Closing|Medium To Long Term Investment
MSFT with its Azure platform saw revenue surpassing the USD20billion mark for the first time, a 36% year on year growth. In the last earnings call on 27th October, CEO Satya Nadella commented that over 78% of the Fortune 500 companies use their hybrid offerings from Azure to all the organisational & communication tools. This stock has an average price target amongst analyst of USD346.00. However we believe MSFT has slightly higher price potential of over USD365.00 in the near to medium term. Although the stock has gone up significantly any pullback below USD330.00 level is a buy. MSFT is one of the few blue chip tech. companies that has a fairly reasonable price to earnings ratio of 37.50
Digital Ocean Holdings Inc (DOCN)|NYSE|USD102.61| 5th November Closing|Medium To Long Term Investment
DOCN had its listing in early 2021 and provides public cloud infrastructure and software services in similar way to Amazon, Google and Microsoft. However, its focus is on small to medium companies including the start up community. This is a lucrative niche for them as they provide services at affordable rates to help smaller businesses, which represent almost half of the economic activity in the US, in their digital transformation and business migration to cloud. This stock is up 90% in the last 3 months and has a potential upside of another 20% in the medium term.
Twilio Inc (TWLO)|NYSE|USD310.60|5th November Closing|Medium To Long Term Investment
TWLO offers a Cloud Communication Platform that enables developers to build and scale real-time communications and software applications. The company offers a customer engagement platform that enables developers to embed voice, messaging, video & email capabilities into their application. It has a forecasted revenue growth of 23% per annum. It has an average price target of USD460.00 by most analyst. Twillio is not a profitable company at the moment and is expected to post its first profits in 2024. The stock is significantly below its six month high of USD409.80 and is at a good entry point. We see a 15% upside in the next 3 months for Twillio.
Unity Software Inc(U)|Nasdaq|USD143.85|5th November Closing|Medium To Long Term Investment
Unity Software's core business is providing real-time 3D development platform especially for the gaming industry. The video game industry is also migrating to the cloud, Unity Software is helping game developers make the transition. Unity, which had its IPO in 2020, is a leading real-time 3D content creation platform. Millions of creators use its software, and billions of users are downloading apps built with Unity. Apart from games Unity's platform is also used by car companies like Volkswagen & Toyota Motors to create interactive and collaborative auto designs. With the hype about the Meta verse, thanks to Facebook, Unity Software shares has seen significant rise from US135 to USD150 in the last 4 weeks of trading. The stock is up over 75% in the last 6 months . Although do expect some short term volatility with this stock. Any price below USD135.00 is a good entry point.
Zoom Video Communications Inc (Zoom)|Nasdaq|USD264.60| 5th November Closing|Medium To Long Term Investment
The videoconferencing service has become a staple during the pandemic by helping family members and business teams stay in touch from afar (as it turns out, many pre-pandemic in-person meetings weren’t all that necessary after all). Zoom is poised to continue on as a basic necessity of corporate communications services long after pandemic restrictions end. Zoom has now added many other services to its growing list of large corporate clients. One of them is Video Engagement Centre (VEC). Zoom Video Engagement Center (VEC) will be an easy-to-use, cloud-based solution that enables experts and end customers to connect over video. The stock is currently 35% below its 6 month high of USD401.00. We believe it is at a good entry level and has a 20% upside potential in the next 3 months.
Global X Cloud Computing ETF (Clou)|Nasdaq|USD31.51|5th November Closing| Medium to Long Term Investment
We end this segment with the Global X Cloud ETF. This ETF top 10 holdings include companies like Salesforce, Twillio, Shopify, Dropbox, Zscaler, Paycom and more . This ETF has seen a steady 28% rise over the last 6 months with one small correction back in October. This is good ETF to invest in the cloud space if you are looking for less volatility and between 10%-15% upside per annum. Any price between USD29.50 - 30.00 is a good entry level.