If you are like most investors, you understand the value of the cloud, yet you are probably unsure as to which cloud computing stock is worth investing in.

Take a look at the sheer number of cloud computing stocks, and you will be taken aback by the number of publicly traded companies in this space. Veeva Systems (VEEV) and Magnite (MGNI) are two of the more intriguing cloud computing plays.

Below, we take a look at VEEV and MGNI to determine which is worthy of a place in your portfolio.

VEEV and MGNI by the Numbers

VEEV currently trades around $286, a mere $26 below its 52-week high of $313.99. VEEV has a forward P/E ratio of 97.45, meaning there is an argument to be made that it is quite overvalued. However, a forward P/E ratio near 100 for a cloud computing stock is not a deal-breaker simply because many high-flying tech stocks trade at similar forward P/E ratios.

The average analyst price target of  VEEV is $300.75, indicating a potential upside of 5%, assuming no unexpected bad news arises. Of the nine analysts who cover VEEV, six recommend buying it, two advise selling, and one recommends holding.

MGNI has an absurdly high forward P/E ratio of 521.20. Though this ratio indicates the stock is overpriced, the truth is, stocks are currently priced several years into the future. This fact does not justify MGNI’s lofty P/E ratio, yet investors should not buy or sell a stock strictly based on the P/E ratio alone.

Analysts view MGNI as overvalued, with an average price target of $20.76 for the stock. If MGNI falls to this level, it will have declined more than 23%. However, it must be noted that seven of seven analysts who cover MGNI have “Buy” ratings.

A Deeper Dive Into VEEV

VEEV appears to provide better value than MGNI based on each stock’s current trading price, yet VEEV is not exactly a POWR Ratings powerhouse. VEEV has a “C” grade in the Trade Grade component and “B” grades in the Industry Rank and Buy & Hold Grade components. Furthermore, the stock has a “D” for Peer Grade.

Of the 71 stocks in the Medical – Services industry, VEEV is ranked #39. Take a look at VEEV’s price returns, and you will find green across the board over the past half-decade.

VEEV doesn’t have a high profile in the tech industry, yet this healthcare cloud company is in a prime position for the industry’s digital transition. VEEV’s cloud platform has helped countless businesses in myriad ways during the pandemic. Companies in the healthcare, pharma, biotech, and consumer product spaces rely on VEEV for cloud service and updates.

If everything goes as planned, VEEV’s aggregate sales will be near $2 billion this year. Add in the fact that VEEV is growing at a clip greater than 30% on a year-over-year basis, and there is even more reason to be bullish about the stock’s future. The icing on the cake is the fact that VEEV has more than $1.5 billion of cash and no debt, meaning it has plenty of “dry powder” to make power moves, including acquisitions.

Is MGNI Worth Buying After Its Recent Ascent?

Check out MGNI’s chart, and you will find the stock has taken off like a rocket since mid-November. MGNI has benefitted from the emergence of connected TV. MGNI’s cloud-based advertising platform is bouncing back quite nicely following the start of the pandemic. MGNI revenue growth is up 12% on a year-over-year basis. The company’s third-quarter connected TV sales soared 51%.

Video streaming on the internet is a key component of MGNI’s rise to prominence. All in all, advertisers using the MGNI platform are up 150% from this time a year ago. Web-based entertainment delivered directly to consumers’ homes is still developing, meaning MGNI still has plenty of runway remaining.

As long as consumers continue to cut the cord on cable TV, MGNI will benefit from the transition to streaming services. So, don’t be dissuaded from investing in MGNI simply because it has climbed high in recent months. The stock could easily move even higher in both the short-term and the long-term.

The Verdict

Ideally, investors could establish positions in both VEEV and MGNI. However, it might be best to wait until MGNI pulls back a bit before investing. VEEV is clearly the better value at this point in time though MGNI might provide greater returns across the long haul. 

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VEEV shares were trading at $290.61 per share on Wednesday afternoon, up $4.17 (+1.46%). Year-to-date, VEEV has gained 106.60%, versus a 16.87% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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