The cloud computing industry is expected to hit fresh highs in the coming months driven by the commercialization of 5G and organizations’ increased adoption of hybrid working models. 

As major industries invest heavily in developing digital infrastructure, internet-based service providers are expected to benefit from increasing IT spending. According to Gartner, worldwide IT spending is expected to reach $4.1 trillion in 2021. Furthermore, the cloud computing market is expected to grow at a 17.9% CAGR over the next five years.

So, as the tech industry recovers from its recent sell-off, Wall Street analysts expect lesser-known companies Avalara, Inc. (AVLR) and Anaplan, Inc. (PLAN) to witness solid upside.

Click here to check out our Software Industry Report for 2021

Avalara, Inc. (AVLR)

AVLR delivers cloud-based solutions. It helps businesses of all sizes to achieve compliance with transaction taxes, including sales and use, VAT, excise, communications and other tax types. The products sold by the company include AvaTax excise, AvaTax communications, returns excise, trustfile, CertCapture, and avalara licensing.

The company’s revenue for the first quarter ended March 31 stood at $153.60 million, which represents a 37.8% year-over-year increase. Its gross profit stood at $108.93 million, up 41.1% from the same period last year. Its total deferred revenue increased 7.5% from its  year-ago value to $225.50 million. AVLR’s non-GAAP net income increased 103.2% year-over-year to $141.80 million. Its non-GAAP EPS came in at $0.35, up 105.9% year-over-year.

Analysts expect AVLR’s EPS to rise 121.7% year-over-year to $0.50 in its fiscal year 2022. The company surpassed consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 31.1% year-over-year to $152.72 million for the quarter ending June 2021.

On April 20, AVLR announced the acquisition of the operational assets of DAVO Technologies LLC, a company that helps emerging small businesses automate the daily and ongoing requirements for sales tax. This acquisition should increase the company’s customer base of  local and regional SMEs.

The stock has gained 23.5% over the past year to close yesterday’s trading session at $125.63. AVLR has an average price target of $192.18, indicating a 57.7% potential upside.

Anaplan, Inc. (PLAN)

PLAN operates a planning and performance management platform that delivers  predictive analytics and cloud collaboration solutions for business groups. The platform provides a combination of predictive analytics, advanced modelling and group collaboration in one solution. It also has applications for various business functions, including finance, sales, marketing, workforce, supply chain, and IT.

For its fiscal year 2020 fourth quarter, ended January 31, 2021, PLAN’s total revenues were  $122.53 million, indicating a 24.7% improvement year-over-year. Its gross profit increased 25.7% from the prior-year quarter to $90.03 million.

PLAN’s EPS is expected to improve by 10% year-over-year for the quarter ended April 30. Moreover, it surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect its revenue to be $553.70 million in fiscal 2021, which represents a 23.7% year-over-year rise.

On April 27, as part of a new multi-year deal, PLAN announced its collaboration with Bitpanda, a data-driven platform to standardize and scale performance management processes globally. This should help PLAN translate the company’s hyper growth ambitions into an actionable and effective strategy.

The stock has rallied more than 31.3% over the past year to close yesterday’s trading session at $54.61. PLAN’s average price target  stands at $85.10, indicating a 56.2% potential upside. 

Click here to check out our Software Industry Report for 2021

AVLR shares were trading at $123.34 per share on Monday afternoon, down $2.29 (-1.82%). Year-to-date, AVLR has declined -25.20%, versus a 12.39% rise in the benchmark S&P 500 index during the same period.

About the Author: Ananyo Guha Niyogi

Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...

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