5 Cheaper Stocks to Help Get Your Feet Wet in Cloud Computing

: KARO | Karooooo Ltd. News, Ratings, and Charts

KARO – The growing adoption of big data across industries is boosting the prospects of the cloud computing market. Moreover, cloud infrastructure spending is expected to increase substantially this year. Thus, we think cloud computing stocks Karooooo (KARO), Telefónica (TEF), KT Corporation (KT), Millicom International (TIGO), and Rimini Street (RMNI), which are trading at a discount, could be ideal investments. Read on….

Businesses across industries are increasingly shifting to the digital realm leading to a rising need for storage and the ability to access and process extensive data. This is where cloud computing comes in. Cloud computing is a network of remote servers hosted on the internet to store and retrieve data.

According to the International Data Corporation (IDC), compute and storage infrastructure products for cloud deployment spending increased 17.2% year-over-year in the first quarter of 2022 to reach $18.30 billion. IDC predicted cloud infrastructure spending this year to grow 22% compared to 2021 to $90.20 billion.

The global cloud computing market was valued at $442.89 billion in 2021. The market is expected to reach $1.37 trillion by 2028, expanding at a CAGR of more than 17.5% between 2022 to 2028.

Given this backdrop, we think fundamentally strong stocks Karooooo Ltd. (KARO), Telefónica, S.A. (TEF), KT Corporation (KT), Millicom International Cellular S.A. (TIGO), and Rimini Street, Inc. (RMNI), which are currently trading at attractive valuations, might be ideal bets to capitalize on the cloud computing market.

Karooooo Ltd. (KARO)

KARO, headquartered in Singapore, provides a mobility software-as-a-service (SaaS) platform for connected vehicles in several parts of the world. The company’s offerings include Fleet Telematics, a fleet management SaaS platform that provides real-time insights, and LiveVision, which offers proactive risk management and fleet visibility.

In terms of its forward EV/EBIT, KARO is trading at 11.46x, 21.4% lower than the industry average of 14.57x. Its forward EV / EBITDA multiple of 6.61 is 44.5% lower than the industry average of 11.91.

KARO’s revenue increased 20.4% year-over-year to ZAR741.65 million ($43.34 million) in the fourth quarter that ended February 28. Its gross profit grew 11.9% from the year-ago value to ZAR458.35 million ($26.79 million), while its net cash flows from operating activities improved 25.8% year-over-year to ZAR181.55 million ($10.61 million).

The consensus revenue estimate of $48.05 million for the first fiscal quarter ended May 2022 indicates an 11.8% improvement year-over-year. The consensus EPS is expected to be $0.27 for the same period, indicating a rise of 0.6% from the prior-year quarter.

The stock has declined 0.7% intraday to close its last trading session at $20.65.

KARO’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

KARO is rated a B in Value, Sentiment, and Quality. Within the Software – Application industry, it is ranked #9 out of 154 stocks. To see additional POWR Ratings for Growth, Momentum, and Stability for KARO, click here.

Telefónica, S.A. (TEF)

TEF provides telecommunications services in Europe and Latin America. It offers mobile and related services, fixed telecommunication services, and internet and broadband multimedia services. The company is headquartered in Madrid, Spain.

In July, TEF announced that its digital business unit Telefónica Tech and software solutions provider BMC announced an agreement to integrate blockchain capabilities into the BMC Helix Control-M platform using Telefónica Tech’s TrustOS service. This might prove to be beneficial for the company.

In June, TEF announced that Telefónica Tech had closed the acquisition of BE-terna, a leading European Microsoft Cloud solutions provider. This is expected to be a step forward in Telefónica Tech’s growth strategy.

TEF’s forward P/E multiple of 10.25 is 40.8% lower than the industry average of 17.31. In terms of its forward EV/EBITDA, the stock is trading at 6.14x, 26.9% lower than the industry average of 8.40x.

TEF’s cash and cash equivalents balance for the quarter ended March 2022 increased 64.2% year-over-year to €8.11 billion ($8.13 billion). Its operating income came at €1.09 billion ($1.09 billion), while EPS attributable to equity holders of the parent came in at €0.12.

Analysts expect TEF’s revenue for the fiscal year ending December 2023 to be $38.77 billion, indicating a 1.2% year-over-year growth.

TEF has gained 7.4% over the past year and 12.5% year-to-date to close its last trading session at $4.77.

It is no surprise that TEF has an overall B rating, which translates to Buy in our POWR Rating system. The stock has a B grade for Value, Stability, and Sentiment. It is ranked #25 out of 47 stocks in the A-rated Telecom – Foreign industry.

Beyond what we’ve stated above, we have also given TEF grades for Growth, Momentum, and Quality. Get all the TEF ratings here.

KT Corporation (KT)

KT is an international provider of integrated telecommunications and platform services. The company, headquartered in Seongnam, South Korea, offers fixed-line telephone services, broadband Internet access, and data communication services.

In June, KT announced that it had co-invested with Hanmi Pharmaceutical in Digital Pharm, a company specializing in DTx and electroceuticals. “I believe KT and Hanmi Pharmaceutical, Korea’s leading companies in ICT and pharmaceuticals, can create synergy to lead the future digital healthcare market,” said Song Jae-ho, Head of KT’s AI/DX convergence business division.

In terms of its forward non-GAAP P/E, KT is currently trading at 6.33x, which is 60.7% lower than the industry average of 16.12x. Its forward non-GAAP PEG multiple of 0.17 is 87.3% lower than the industry average of 1.30.

For the first quarter of 2022, KT’s operating revenues increased 4.1% year-over-year to KRW6.28 trillion ($4.77 billion). Its operating income rose 41.1% to KRW626.60 billion ($ 475.64 million), while its net income came in at KRW455.40 billion ($345.69 million), up 39.5% from the prior-year period.

Street EPS estimate for the fiscal year ending December 2023 of $2.29 indicates a 4.7% year-over-year growth. Likewise, Street revenue estimate for the same period of $14.77 billion reflects a rise of 2.9% from the prior year.

KT’s stock has gained 10.3% year-to-date and 4.8% over the past six months to close its last trading session at $13.87.

KT’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating translates to Strong Buy in our proprietary rating system.

KT has an A grade for Value and Stability and a B for Sentiment. It is ranked #2 in the Telecom – Foreign industry. Click here to see the additional KT ratings (Growth, Momentum, and Quality).

Millicom International Cellular S.A. (TIGO)

TIGO operates as a cable and mobile services provider in Latin America and Africa. The company’s offerings include mobile data and voice, short message services, and mobile financial services. The company is headquartered in Luxembourg.

In July, TIGO announced that its operation in Colombia had entered into a wholesale network access agreement with Ufinet to offer Tigo-branded broadband internet, PayTV, telephony, and over-the-top services to residential and business customers, leveraging Ufinet’s extensive fiber-to-the-home network in Bogota. The partnership is expected to bolster the company’s growth.

In June, TIGO declared the closing of its transaction to acquire the remaining 20% interest in Telecomunicaciones Digitales, S.A., making the company the 100% owner of Tigo Panama.

TIGO’s forward Price/Sales multiple of 0.38 is 70% lower than the industry average of 1.28. In terms of its forward Price/Cash Flow, the stock is trading at 0.91x, 89% lower than the industry average of 8.31x.

TIGO’s revenue increased 40.9% year-over-year to $1.41 billion in the first quarter of 2022. Its operating profit grew 126.3% from the year-ago value to $234 million, while its non-IFRS EBITDA improved 55.8% year-over-year to $564 million.

The consensus EPS estimate of $1.48 for the fiscal year ending December 2023 indicates a 95.4% year-over-year improvement. The consensus revenue is expected to be $6.12 billion for the same period, reflecting a 5.7% year-over-year growth.

The stock has declined 3.8% intraday to close its last trading session at $12.98.

TIGO has an overall B rating, translating to Buy in our POWR Ratings system. The stock is rated a B in Growth, Value, and Stability.

Within the Telecom – Foreign industry, it is ranked #9. To see additional POWR Ratings for Momentum, Sentiment, and Quality for TIGO, click here.

Rimini Street, Inc. (RMNI)

RMNI offers enterprise software products, services, and support for various industries. The company sells its solutions mainly through direct sales organizations. It provides software support services for Oracle and SAP enterprise software products.

In June, RMNI announced that the State Library of Victoria, Australia, had entrusted the support and maintenance of its Oracle E-Business software to the company. This might benefit the company.

Earlier in the same month, RMNI also announced an increase to its previously announced common stock repurchase program to up to $50 million over the next four years. This is expected to enhance shareholder value.

In terms of its forward EV/Sales, RMNI is trading at 1.13x, 57.2% lower than the industry average of 2.64x. Its forward Price/Sales multiple of 1.28 is 50.9% lower than the industry average of 2.60.

RMNI’s revenue came in at $97.91 million for the first quarter that ended March 31, representing an 11.4% year-over-year growth. Its non-GAAP operating income grew 30.1% from the prior-year quarter to $12.10 million, while its non-GAAP net income rose 9% from the same period last year to $9.25 million.

Analysts expect RMNI’s revenue for the quarter that ended June 2022 to be $99.23 million, indicating an 8.3% year-over-year growth. The company’s EPS for the same quarter is expected to increase 13.3% from the prior-year quarter to $0.11.

RMNI has gained 16.9% over the past six months and 3.7% over the past month to close its last trading session at $5.99.

It is no surprise that RMNI has an overall A rating, equating to Strong Buy in our POWR Rating system. The stock has an A grade for Quality and a B for Growth and Value. It is ranked #1 in the Software – Application industry.

Beyond what we’ve stated above, we have also given RMNI grades for Momentum, Stability, and Sentiment. Get all the RMNI ratings here.

KARO shares were trading at $21.31 per share on Friday afternoon, up $0.66 (+3.20%). Year-to-date, KARO has declined -47.74%, versus a -18.45% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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