The cloud computing industry ranks among the top markets—a marketplace that is worth investing in.
Cloud computing is the most advanced technology in the computing world—uplifting the operations through its services. Cloud computing companies provide various solutions to the digital world including databases, networking, analytics, intelligence, software, and much more.
The demand for cloud solutions is growing in almost every industry. The industry is hotter than ever. Despite the initial pause in IT operations last year due to the COVID-19 pandemic, the spend on cloud computing is expected at around $258 billion in 2020. This is an almost 6% spike from $242.7 billion in 2019. Moreover, the forecast for 2021 is estimated to be around 18%+, according to Gartner.
This year’s anticipated growth shows that the cloud computing industry has massive potential. In the coming years, it will spike at a more rapid pace. This makes cloud computing stocks a potential long-term investment. So, here are the top three stocks for investment in 2021.
Microsoft Corp. (MSFT)
Microsoft Corp. (MSFT) is a famous cloud computing provider in the world. It’s one of the pioneers of cloud computing. The company is well-known for its Windows and Office software, which have turned the company into a cloud deity.
However, in recent times, Microsoft has been facing immense competition from Amazon, the first company to introduce cloud computing in 2008. However, Microsoft is right behind Amazon with the second biggest market share in the cloud industry.
Microsoft’s core cloud service platform, Azure leads the company with its fundamental IT infrastructure and ecosystem. The company reported a 48% increase in Azure’s services revenue for the first quarter of 2021. The strong Q1 performance indicates that it will keep up the growth rate, similar to that in the past year. While Office 365, the SaaS could service saw a 21% growth in Q1 over last year.
Microsoft was up among the top ranks during a tough 2020 and is continuing the growth this year. Wall Street analysts have raised their price target for MSFT stock. Morgan Stanley has increased from a price target of $249 to $260. Whereas, Citi has raised it from $229 to $272. Currently, MSFT stock is following a bearish trend and that’s when smart investors jump in and buy the stock at a low price.
Twilio (TWLO) is a platform-as-a-service that provides digital communication services to software developers to enhance their experience. The company has dedicated and strong management that has transformed Twilio into an impactful communication service. The company provides its services to top-level customers which includes Zoom and Netflix, to name a few.
Twilio has a diverse revenue stream as 27% of its revenue is generated outside of the U.S. This is a great positive for the company as it helps in hard times. In that premise, the company reported a rise in its revenue by 52%to $448 million in Q3 2020.
In the long-term, Twilio has forecasted 30%+ organic revenue for the next four years annually. While the gross margin is expected to increase by 60%. The increase in future outlooks is supported by Twilio’s plan to invest in its businesses. On the contrary, the company expects operating losses in 2021 with an increase in expenses due to new investments.
So, Twilio (TWLO) is ranked among the top cloud computing stocks in the market today.
Oracle Corp. (ORCL)
Oracle Corp. (ORCL) is a Logging-as-a-Service (IaaS) that delivers its services on-premises. Analysts say that Oracle is a cheap bet in the cloud computing sector. The company has been constant over the years and has stamped a strong position in the market.
Each company is turning its ecosystem into digital networking. So, the demand for cloud-based services will spike across different industries. Oracle has a big opportunity to expand its network in the market.
Recently, Oracle along with cloud giants Microsoft and Salesforce.com made a coalition to develop a digital passport for COVID-19 vaccines. This reflects that the company is working at its maximum to add its value to the market.
With the past year summing up, Oracle reported the full-year 2020 results. The revenues for the full year plunged by 1% to $39.1 billion. Whereas, the cloud services and license support revenues were up by 3% to $27.4 billion.
The overall results for 2020 were on the lower side. However, Oracle made a robust development in the fourth quarter. The Fusion ERP and Fusion HCM cloud revenues were up by 32% and 27% in Q4 2020, respectively. The strong Q4 results show that the company has started to recover from the pandemic impact. The new year is expected to change things in favor of Oracle.
The long-term potential looks bright for the company and it will drive the stock price in the next couple of years. So, keep ORCL stock in your books.