Are These The Top Cloud Stocks For Q4 2020?
Cloud stocks have had an amazing year so far in the stock market. Furthermore, the results of the U.S. Presidential Election shook the world last weekend. The stock market has seen massive rallies not only from this piece of news but also from the news of a promising Pfizer (PFE Stock Report) vaccine. As more details arise about the efficacy of the vaccine, top tech stocks that fell are beginning to recover. Investors may be realizing that a vaccine is still rather far off. More importantly, the focus has shifted towards what a Biden administration could spell for big tech stocks.
The current president-elect has made promises to go hard on big tech companies. This includes holding Facebook (FB Stock Report) accountable for not doing enough to limit misinformation. Additionally, it also involves the repeal of Section 230 of the Communications Decency Act. This internet policy essentially acts as a legal liability shield for tech companies. With a transition team packed with tech executives, his intentions on this matter are clear. The team includes executives from Amazon (AMZN Stock Report), LinkedIn, and Google (GOOGL Stock Report).
With this shift to the left on tech policy, top cloud computing stocks are back onto investors’ radar. In light of this possible change in industry policies, large tech companies will rely on cloud computing more than ever. Cloud computing provides a viable means of storing and managing the massive amounts of information handled by these companies. In essence, cloud computing companies could provide a crucial service to Big Tech when the time comes. In addition to that, the cloud industry is estimated to have a compound annual growth rate (CAGR) of 17.5% (up to $832.1 billion) by 2025 according to a report published by Research and Markets. Could the possible legal battles ahead add to the present tailwind for top cloud computing stocks?
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Top Cloud Stocks For Q4 2020: Datadog Inc
Datadog (DDOG Stock Report) is an American cloud computing stock that was founded in 2010. It is most well-known for providing monitoring services for cloud-scale applications. The company also monitors servers, databases, tools, and services, through a Software as a service (SaaS) based data analytics platform. Unsurprisingly, it has seen a 181% rise in share prices since the March stock market slide.
Datadog announced its third-quarter on Tuesday after the closing bells. The company reported a 61% year-over-year increase in revenue. This is likely due to the increase of larger customers ($100,000+ Annual Recurring Revenue) from 727 to 1,107 year-over-year. Datadog also announced strategic partnerships with the likes of Microsoft (MSFT Stock Report) and Google. Apart from beating top-line expectations, the company even presents strong guidance going into the fourth quarter. Despite its amazing performance in the last quarter, investors are still not convinced. This is evident as the stock fell more than 10% as of 12.26 pm ET. It appears that strong performance and solid guidance are not enough to sell investors on this cloud computing stock. This, however, could present investors with a nice setup to buy on the dip.
From its recent news, Datadog announced the extension of its European Google Cloud data center. The partnership began in 2019 and will now extend services to include new regions. This will make it easier for organizations to access and implement Datadog’s monitoring and security platform. Moving forward Datadog could prove to be a valuable asset in Google’s internet policy battles. With DDOG stock continuing to spiral downwards in recent weeks, should investors scoop up its shares when there’s blood on the street?
Top Cloud Stocks For Q4 2020: CrowdStrike Holdings Inc
Next up is CrowdStrike Holdings (CRWD Stock Report). CrowdStrike is undoubtedly an industry darling when it comes to cybersecurity and cloud computing. It provides endpoint security, threat intelligence, and cyber-attack response services. The company has been involved in several high-profile cyberattacks. It is obviously no newcomer in the field of cloud computing security. As is in the business of security, the more people can trust you, the more likely they are to invest in your services. This is especially important in a time where most companies have shifted their overall infrastructures towards cloud platforms.
The company has undeniably had a good year with current year-to-date growth of 162%. It reported an 84% year-over-year increase in revenue for fiscal second-quarter 2021. The 89% increase in subscription revenue most likely played a big part in this. Furthermore, the company reported an 87% increase in Annual Recurring Revenue (ARR) year-over-year. The pandemic and work from home measures have definitely been a driving force towards CrowdStrike’s explosive growth this year.
Recently, the company made a key acquisition in the form of Preempt Security for $96 million in cash and stock. Preempt Security is a leading provider of Zero Trust and conditional access technology for real-time access control and threat prevention. This is likely a move by CrowdStrike to further fortify its portfolio of threat prevention services in anticipation of future customer base growth. This collaboration will fundamentally enhance its platform with identity security capabilities. CrowdStrike could be a source of security and assurance for tech companies in the months to come. With that in mind, would you include CRWD stock on your list of top cloud computing stocks to buy?
Top Cloud Stocks For Q4 2020: Salesforce.com, Inc
The last cloud computing stock on this list would be Salesforce.com (CRM Stock Report). This cloud-based software company is based in California and was founded in 1999. It is reportedly holding the largest cloud-based customer relationship management (CRM) software platform in the world. This adds up to a staggering 18.4% of the market. Additionally, the company provides cloud-based e-commerce, marketing, and analytical services as well. All of these services have one key aspect in common. That is, they all integrate “Einstein”. Einstein is the company’s artificial intelligence service that runs the numbers from Salesforce’s services and makes predictions about a company’s customer base.
Salesforce has seen tremendous gains since the stock market slide in March. The company boasts a 104% increase in its share price since the March lows. This is no surprise as demands for this service have likely gone up since the start of the year. It reported a 29% year-over-year increase in revenue in its second-quarter fiscal. In light of the successful quarter, the company raised its fiscal year 2021 revenue guidance by 21% year-over-year.
In recent news, Salesforce is making moves beyond its $15.7 billion acquisition of Tableau Software. Salesforce’s Einstein Analytics will reportedly be rebranded. The analytical prowess of Einstein will be consolidated with Tableau’s current offerings. Tableau chief product officer Francois Ajenstat explains that this collaboration will “enable no-code data science for as many organizations as possible”. In short, this new branch of Salesforce could prove to be a vital operating medium for tech companies facing federal investigations in a Biden administration. Having said all this, could CRM stock be a top cloud stock to watch this quarter?