Companies that provide cloud-based services grew exponentially last year as COVID-19-pandemic-led restrictions compelled most businesses to operate remotely. With continuing innovation in the fields of artificial intelligence (AI) and machine learning (ML), among others, the cloud industry is expected to gain in the long-term also. According to Fortune Business Insights, the global cloud computing market is expected to grow at a 17.9% CAGR between 2021- 2028.
Nevertheless, investors are rotating away from expensive tech stocks into cyclical stocks amid the economic recovery and this is driving cloud stocks to weak performances as well. This is evident in First Trust Cloud Computing ETF’s (SKYY) 1.9% loss over the past three months versus the SPDR S&P 500 ETF’s (SPY) 10.4% gains. Also, companies that offer cloud-based services face privacy and security concerns regarding data losses, data breaches, application vulnerabilities and online cyber-attacks.
With increasing competition in the cloud space, not all stocks are great buys. So, we think fundamentally weak cloud stocks Lightspeed POS Inc. (LSPD), Anaplan, Inc. (PLAN), and Appian Corporation (APPN) are best avoided now.
Lightspeed POS Inc. (LSPD)
Based in Canada, LSPD provides commerce-enabling Software as a Service (SaaS) platform for small and midsize businesses worldwide. Its SaaS platform enables retailers, restaurants and other small- and medium-sized enterprises (SMB) to engage with consumers across online, mobile, social and physical channels.
On April 16, LSPD completed the acquisition of Vend Limited. It is a cloud-based retail management software company headquartered in Auckland, New Zealand. However, it’s uncertain if this will prove to be a profitable acquisition for LSPD.
LSPD’s operating loss increased 110.6% year-over-year to $43.13 million for its fiscal fourth quarter, ended March 31, 2021. Its comprehensive loss increased 89.4% year-over-year to $47.1 million, while its net loss increased 126.1% year-over-year to $42.04 million. The company’s loss per share increased 61.9% year-over-year to $0.34.
LSPD’s annual revenue is expected to increase 100.3% year-over-year to $444.13 million in fiscal year 2022. However, its EPS is expected to remain negative in its fiscal year 2022 and 2023. The stock gained only 0.7% over the past month to close Friday’s trading session at $71.99.
LSPD’s poor prospects are apparent in its POWR Ratings also. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a D grade for Growth, Stability and Quality, and an F grade for Value. Click here to see the additional POWR ratings for LSPD (Momentum and Sentiment). It is ranked #52 of 58 stocks in the D-rated Software – Business industry.
Anaplan, Inc. (PLAN)
PLAN provides a cloud-based connected planning platform to connect organizations and people. The company delivers its application over the Internet as a subscription service using a software-as-a-service model, and offers professional services related to the implementation and support of its application.
Several law firms launched an investigation against PLAN in October last year due to concerns on whether the company and certain of its officers and/or directors have engaged in securities fraud or other unlawful business practices. Analysts had noted that PLAN’s billings growth rate had fallen to half its historical rate, and that the ‘significant drop’ in billings was a strong sign of a business in trouble.
Indeed, PLAN’s operating loss increased 28% year-over-year to $49.62 million for its fiscal first quarter, ended April 30, 2021. Its net loss for the quarter was $51.49 million, which represents a 30% year-over-year increase. The company’s loss per share increased 24.1% year-over-year to $0.36.
Analysts expect PLAN’s annual revenue to increase 24.7% year-over-year to $558.18 million in its fiscal year 2022. However, the company’s EPS is expected to remain negative in its fiscal year 2022 and 2023. The stock has lost 28.3% year-to-date to close yesterday’s trading session at $51.51.
PLAN’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, which equates to Sell in our proprietary rating system. The stock has an F grade for Sentiment, and a D grade for Value and Momentum.
Appian Corporation (APPN)
APPN offers a low-code automation platform that automates the creation of forms, workflows, data structures, reports, and other software elements. It provides its services to a range of industries including energy, insurance, manufacturing, public sector, retail and transportation.
The company unveiled the latest version of the Appian Low-code Automation Platform on May 11, 2021. It expands the boundaries of the low-code industry with the introduction of low-code data and a code-free approach to unifying enterprise data. However, with the increasing number of products and services in this space, APPN’s offering might not be successful in grabbing a significant market share.
APPN’s operating loss increased 21.9% year-over-year to $10.49 million for fiscal first quarter, ended March 31, 2021. Its net loss increased 16.4% year-over-year to $13.59 million. The company’s loss per share increased 11.8% from the same period last year to $0.19.
The company’s annual revenue is expected to increase 16.4% year-over-year to $354.65 million in its fiscal year 2021. However, analysts expect APPN’s EPS to remain negative in its fiscal year 2021 and 2022. The stock has lost 53.3% over the past six months to close Friday’s trading session at $90.48.
APPN’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, which translates to Sell in our proprietary rating system. It has a D grade for Growth, Value, Stability, Momentum and Sentiment.
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LSPD shares were trading at $71.72 per share on Tuesday afternoon, down $0.27 (-0.38%). Year-to-date, LSPD has gained 1.89%, versus a 12.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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