“The Cloud” evolved from a budding innovation in tech into one of the largest factors driving growth in the technology sector in a relatively short period of time. Today, cloud computing is an integral part of the broader tech industry, along with businesses big and small and even the lives of everyday consumers.
Think how much market share e-commerce giant Amazon’s AMZN AWS cloud computing business grabbed based on its significant head start into the now-booming market. Meanwhile, business services firms such as Salesforce CRM have expanded quickly in the larger cloud-based SaaS market.
With this in mind, check out these three cloud stocks to consider buying right now that also happen to be mega-cap powers…
1. Alibaba BABA
Alibaba operates a very similar business model compared to its American counterpart Amazon. The Chinese e-commerce firm looks strong as it enters the next phase of its storied history after billionaire founder Jack Ma officially stepped down. BABA’s annual active consumers on its retail marketplaces reached 674 million, up 98 million from the year-ago period, with mobile MAUs up 121 million to 755 million. Retail still accounted for 87% of total sales last quarter. But BABA’s cloud computing sales skyrocketed 66% in Q1 fiscal 2020 to account for 7% of total revenue. The firm also recently announced a partnership with Salesforce.
Moving on, our Zacks Consensus Estimates call for Alibaba’s quarterly revenue to pop 35.7%, with full-year fiscal 2020 revenue projected to climb over 32%. Looking further down the road, the company’s 2021 sales are expected to climb 31% above our current-year estimate in a sign of impressive and stable expansion amid worries about a slowing Chinese economy. BABA’s bottom-line growth looks even more impressive, and its earnings estimates have climbed significantly recently. Alibaba is a Zacks Rank #1 (Strong Buy) right now that holds a “B” grade for Growth and an “A” Momentum in our Style Scores system. Shares of Alibaba also sit below their 52-week high and its valuation picture looks better and better.
2. Alphabet Inc. GOOGL
Google parent Alphabet Inc. doesn’t need much introduction. However, investors should know that the company has tried to expand beyond its ad-heavy search business. This will become even more important as the tech titan faces further government scrutiny, along with the likes of Facebook FB and others. Google is ready to roll out a cloud gaming service called Stadia this fall, as it plans to capture its share of the $152 billion global video game market, and get in near the ground floor of cloud gaming. Google also operates a huge cloud business on both an enterprise and consumer-facing level.
Shares of GOOGL have matched the larger Computer Software-Services Market so far in 2019, up roughly 18%. Google stock is trading below its industry’s average forward P/E of 27.9X at 22.7X, which also comes in below its own five-year median of 25.1X. Along with some solid valuation metrics, Alphabet’s full-year revenue is expected to climb 20.2% this year and 17.5% above our 2019 estimates in 2020. GOOGL’s EPS figure is projected to climb 8% and 9%, respectively. Google is currently a Zacks Rank #2 (Buy) that has seen its overall earnings estimate revision picture trend heavily in the right direction. And although Google still doesn’t pay a dividend, the firm returns value to shareholders through buybacks.
3. Microsoft MSFT
Microsoft has been a staple of the cloud industry for years and its expansion has seen it further encroach on Amazon’s dominance. MSFT’s expanding cloud business plays an integral part in the company’s growth, which looks even more impressive considering its size and age. Intelligent Cloud revenue climbed 19% last quarter, with Azure up 64% growth. The Redmond, Washington-headquarter firm has cloud gaming plans and it has landed major cloud clients such as Walmart WMT. MSFT is also the only company on this list that pays a dividend, with a current annualized payout of $1.84 per share
The firm’s 1.34% dividend yield looks even stronger when investors consider that MSFT shares have soared 34% in 2019, against its industry’s 18% climb. Furthermore, the yield on the 10-year U.S. Treasury note rests at 1.8%, which helps make Microsoft look like a safe-haven investment as global economic uncertainty remains. MSFT is a Zacks Rank #2 (Buy) currently that also rocks an “A” grade for Growth. The company’s current fiscal 2020 revenue is projected to jump over 11%, with 2021 projected to come in 10.5% higher. Meanwhile, MSFT’s adjusted fiscal 2020 and 2021 earnings are expected to surge 10% and 13%, respectively.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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