The cloud computing industry is expected to expand at a CAGR of 17.5% over the next five years, hitting $832.10 billion by 2025. The expansion of remote work and entertainment activities that has been driven by lockdown conditions necessitated by the COVID-19 pandemic, have accelerated industry’s growth. While coronavirus vaccine deployment has led to a temporary pullback by cloud computing stocks, a renewed lockdown regime in the U.K., and the news that a second, more contagious, strain of COVID-19 is now in the U.S., have renewed investor optimism.
However, concomitant with its rapid growth last year, the cloud computing industry has become more vulnerable to cyberattacks and malware, and with that an increased risk of sensitive data being stolen or leaked. In the light of a recent cyberattack on several U.S. government agencies–which is deemed to be the largest such attack in history–most companies are now switching to cloud computing platforms that are perceived as “reliable” to secure their information.
Companies such as Twilio Inc. (TWLO), Veeva Systems Inc. (VEEV) and Nutanix, Inc. (NTNX) are among the global cloud computing companies that offer secure and versatile platforms that suite most business models. These companies have proven track records of secure data storage and transmission, making them among the most coveted platforms by businesses. As such, we think these companies are well-positioned to deliver higher revenues and earnings soon, which should drive their stock prices higher.
Twilio Inc. (TWLO)
TWLO is a cloud communications platform that facilitates developers’ ability to build, scale and enable communications within software applications. The company offers three distinct software services – Programmable Communications Cloud, Super Network and Business Model for Innovators, with an international market reach.
On November 2, TWLO acquired customer data platform, Segment, in exchange for $3.20 billion of TWLO class A stock. This acquisition provides TWLO the opportunity to enhance its customer engagement services by integrating digital engagement platforms in its software portfolio.
Earlier, in September, the company expanded its internet of Things (IoT) offerings by launching Microvisor connectivity and a device management platform. This should allow TWLO to capitalize on current, disruptive industry trends, thereby emerging as a market leader in this space.
TWLO’s revenues have increased 52% year-over-year to $448 million in the third quarter ended September 30, 2020. Its non-GAAP income from operations has risen 302.8% from negative year-ago values to $7.30 million. The company’s active customer accounts have increased 21% from the same period last year to more than 208,000 as of September 30.
TWLO’s EPS is expected to rise at a rate of 20.5% per annum over the next five years. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $454.20 million for the fourth quarter ended December 31, 2020 represents a 37.1% rise year-over-year.
TWLO has gained more than 390% since hitting its 52-week low of $68.06 in March last year. The stock hit its 52-week high of $374.49 on December 22, 2020.
How does TWLO stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Overall POWR Rating.
In the 11-stock Software- SAAS industry, it is currently ranked #2.
Veeva Systems Inc. (VEEV)
VEEV develops cloud-based software solutions for the global life sciences industry. It offers a Veeva CRM family of applications, comprising Commercial Cloud, Vault, and Network Master Data Management solutions. The company also offers after sales support and technical consulting services internationally.
VEEV’s proprietary technology, Veeva link, offers real time customer intelligence for life sciences. In November, VEEVE added links to 11 therapeutic areas catering to oncology. VEEV’s link for Oncology is one of the preferred software solutions for hospitals worldwide and is used by six of the top 10 largest pharmaceutical companies.
In December, contract research firm GenesisCare Clinical CRO adopted VEEV clinical vault applications to streamline its trial management process through a unified and secure cloud platform. Integrate LifeSciences, Samsung Biologics and Simbec–Orion also adopted VEEV’s suit of software applications over the past month. This reflects VEEV’s expanding market reach and the popularity of its integrated model worldwide.
VEEV’s total revenues have increased 34% year-over-year to $377.50 million in the fiscal third quarter ended October 31, 2020. This can be attributed to a 34% rise in subscription revenues to $302.90 million over this period. Non-GAAP operating income has risen 39% from the year-ago value to $155.50 million. And non-GAAP EPS has grown 30% from the prior year quarter to $0.78.
A consensus EPS estimate of $0.68 for the fiscal fourth quarter ending January 31, 2021 represents a 25.9% improvement year-over-year. Moreover, VEEV beat the Street EPS estimates in each of the trailing four quarters, which is impressive. The consensus revenue estimate of $380.24 million for the ongoing quarter indicates a 22.1% rise from the same period last year.
VEEV gained more than 165% to hit its 52-week high of $313.99 in October 2020 since hitting its 52-week low of $118.11 in March last year.
VEEV’s POWR Ratings reflect this promising outlook. It is rated “Buy” with a “B” for Trade Grade, Buy & Hold Grade, and Industry Rank. It is currently ranked #25 of 72 stocks in the Medical – Services industry.
Nutanix, Inc. (NTNX)
NTNX is a cloud communications platform that converges visualization, enterprise storage services, and networking services into an integrated customer-oriented solution. It offers enterprise cloud platform and software solutions for automotive, healthcare, consumer goods and financial services companies worldwide. NTNX was recognized as an industry leader by Gartner, Inc., and The Forrester Wave last year.
The company was selected by Seattle Children’s Trust and by energy producing company Total for digital transformation and cloud communication development for these businesses late last year. This reflects the NTNX’s popularity and technological prowess that is respected by businesses worldwide.
In December, NTNX expanded its cloud computing platform to integrate new hybrid cloud capabilities. The upgrade should allow NTNX’s software to run on any cloud platform, facilitating the IT management process.
NTNX’s annual contract value (ACV) billings have increased 10% year-over-year to $137.80 million in the fiscal first quarter ended October 31, 2020. The company’s run-rate ACV has risen 29% from the year-ago value to $1.29 billion, while non-GAAP gross margin has grown 180 basis points to 81.9%. Its EPS has increased 7.6% from the year-ago value.
Analysts expect NTNX’s EPS to rise to 20% in the current quarter (ending January 31, 2021), and 7.2% in next quarter (ending March 31, 2021). The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in each of the trailing four quarters. A consensus revenue estimate of $315.38 million for the next quarter ending March 2021 represents a slight improvement year-over-year. NTNX has gained more than 175% since hitting its 52-week low of $11.31 in March.
It is no surprise that NTNX is rated “Buy” with an “A” for Trade Grade and a “B” for Industry Rank. It is currently ranked #37 of 102 stocks in the Software – Application industry.
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TWLO shares were trading at $335.74 per share on Tuesday afternoon, up $1.15 (+0.34%). Year-to-date, TWLO has declined -0.82%, versus a -0.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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