Following the recent release of the historically high inflation data, the Fed is expected to hike interest rates aggressively this year, which is expected to impact the tech industry adversely. According to the chief global economist of Citi Research, Nathan Sheets, the latest U.S. January inflation data is like a “punch in the stomach” for the Federal Reserve. However, due to rising demand, the global smart cloud segment is expected to withstand the squall amid rapid digitization in a highly data-driven world.
Certain smart cloud companies with robust financials are consistently developing their products and services, offering immense convenience to a plethora of users worldwide in remote work environments. In addition, according to Grand View Research, the global cloud computing market is slated to grow at a 15.7% CAGR through 2030.
So, we believe fundamentally sound smart cloud stocks Akamai Technologies, Inc. (AKAM) and Dropbox, Inc. (DBX), which are trading below their 52-week highs, could be solid additions to one’s portfolio now.
Akamai Technologies, Inc. (AKAM)
AKAM in Cambridge, Mass., provides cloud services for securing, delivering, and optimizing content and business applications over the internet in the United States and internationally. AKAM has the world’s largest and most trusted edge platform.
On Oct. 21, 2021, AKAM announced the complete acquisition of Guardicore of Tel Aviv, Israel. This is expected to enhance AKAM’s existing product portfolio and thereby improve its financials.
AKAM’s revenue increased 8.5% year-over-year to $860.33 million for the third quarter, ended Sept. 30, 2021. Its non-GAAP net income came in at $238.94 million, up 10.7% year-over-year, while its non-GAAP EPS also increased 10.7% year-over-year to $1.45.
Analysts expect AKAM’s revenue and EPS to increase 8.5% and 4.6%, respectively, year-over-year to $3.75 billion and $5.93 in its fiscal 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. Its shares have gained 7.4% in price over the past year to close yesterday’s trading session at $112.84. The stock is currently trading 6.5% below its 52-week high of $120.68, which it hit on July 30, 2021.
AKAM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
AKAM has a B grade for Growth, Value, and Quality. In the Technology – Services industry, it is ranked #7 of 81 stocks. Click here to see the additional POWR Ratings for Momentum, Sentiment, and Stability for AKAM.
Dropbox, Inc. (DBX)
DBX San Francisco provides a collaboration platform worldwide. The company’s solutions include Dropbox paper and doc scanners. With more than 700 million registered users across 180 countries, it aims to design a more enlightened way of working.
On Nov. 4, 2021, DBX’s co-founder and CEO, Drew Houston, said, “Q3 was another solid quarter with record free cash flow, strong revenue growth, and great progress against our strategic objectives as we focus on delivering more value to our customers and shareholders. We shipped several new product experiences to help our customers with today’s challenges of distributed and remote work, and I’m confident in our future as we work toward our vision of building one organized place for content and all the workflows around it.”
For its fiscal third quarter, ended Sept. 30, 2021, DBX’s revenue increased 12.9% year-over-year to $550.20 million. The company’s non-GAAP net income increased 33.5% year-over-year to $147.10 million. Also, its non-GAAP EPS came in at $0.37, up 42.3% year-over-year.
DBX’s revenue is expected to be $2.36 billion in fiscal 2022, representing a 9.8% year-over-year rise. The company’s EPS is expected to increase 16.8% per annum for the next five years. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 5.2% in price to close yesterday’s trading session at $25.16. It is currently trading 23.8% below its 52-week high of $33.00, which it hit on August 6, 2021.
DBX’s strong fundamentals are reflected in its POWR Ratings system. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
In addition, it has an A grade for Quality and a B grade for Growth. DBX is ranked #11 in the Technology – Services industry. Click here to see the additional POWR Ratings for DBX (Value, Momentum, Stability, and Sentiment)
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AKAM shares were trading at $111.13 per share on Friday afternoon, down $1.71 (-1.52%). Year-to-date, AKAM has declined -5.05%, versus a -7.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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