Businesses are increasingly adopting hybrid and multi-cloud strategies, combining public, private, and on-premise clouds. This flexibility prevents vendor lock-in, ensures data compliance, and optimizes costs. As demand for digital transformation grows, companies utilizing cloud solutions are positioned to thrive, presenting lucrative investment opportunities.
Therefore, investors should consider robust cloud computing stocks such as Alphabet Inc. (GOOGL), International Business Machines Corporation (IBM), and Workday, Inc. (WDAY) – opportunities one can't afford to miss.
Cloud computing has transformed identity management and security, automating enterprise services globally. High-speed internet and innovative tech services have streamlined business operations through enhanced storage, databases, and cybersecurity solutions. Worldwide spending on public cloud services is projected to reach $805 billion in 2024 and double by 2028, according to the latest IDC report.
Furthermore, cloud computing is essential to the modern economy, allowing businesses to scale and innovate effectively. Companies are constantly adapting to meet market demands for data availability, security, and business continuity. Hence, in Q2 2024, global spending on cloud infrastructure services grew 19% year-on-year, reaching $78.20 billion and emphasizing its rising significance in various sectors.
Given these favorable trends in the cloud computing market, let’s take a closer look at the fundamentals of the three cloud computing stocks mentioned above.
Alphabet Inc. (GOOGL)
GOOGL offers various products and platforms in the United States, Europe, the Middle East, Africa, Asia-Pacific, Canada, and Latin America. It operates through its Google Services, Google Cloud, and Other Bets segments.
Bottom of Form
In terms of the trailing-12-month net income margin, GOOGL’s 26.70% is 805.9% higher than the 2.95% industry average. Its 30.87% trailing-12-month Return on Common Equity is 861.6% higher than the 3.21% industry average. Moreover, its 21.13% trailing-12-month Return on Total Assets is significantly higher than the 1.24% industry average.
GOOGL’s revenues for the second quarter that ended June 30, 2024, increased 13.6% year-over-year to $84.74 billion. The company’s income from operations rose 25.6% from the year-ago value to $27.43 billion.
Its net income and EPS rose 28.6% and 31.3% over the prior-year quarter to $23.62 billion and $1.89, respectively. Also, its company’s cash and cash equivalents came in at $27.23 billion as of June 30, 2024, compared to $24.05 billion as of December 31, 2023.
Street expects GOOGL’s EPS and revenue for the quarter ended September 30, 2024, to increase 18.5% and 12.5% year-over-year to $1.84 and $86.27 billion, respectively. It surpassed the consensus EPS estimate in each of the trailing four quarters. The stock has gained 26.8% over the past year to close the last trading session at $167.19.
GOOGL’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #16 out of 52 in the A-rated Internet industry. It has a B grade for Stability and Quality. Click here to see GOOGL’s Growth, Value, Momentum, and Sentiment ratings.
International Business Machines Corporation (IBM)
IBM and its subsidiaries provide integrated solutions and services worldwide. The company operates through the Software, Consulting, Infrastructure, and Financing segments.
On September 26, 2024, IBM announced the expansion of its Quantum Data Center in Poughkeepsie, New York, introducing the IBM Quantum Heron processor, which offers improved performance and speed for global clients.
On September 24, 2024, IBM and EY announced a collaboration to leverage Apptio software, launching new solutions aimed at enhancing enterprise technology spend visibility and management. These solutions focus on improving decision-making, reducing manual reporting, and enabling organizations to optimize cloud investments and IT resources effectively.
In terms of the trailing-12-month levered FCF margin, IBM’s 13.21% is 27.5% higher than the 10.36% industry average. Its 23.45% trailing-12-month EBITDA margin is 133.4% higher than the 10.05% industry average. Also, its 7.50% trailing-12-month Return on Total Capital is 169.7% higher than the industry average of 2.78%.
During the fiscal second quarter that ended on June 30, 2024, IBM’s total revenue increased 1.9% year-over-year to $15.77 billion. Its non-GAAP gross profit stood at $9.12 billion, up 5.4% year-over-year over the prior year’s quarter. For the same quarter, IBM’s non-GAAP income from continuing operations came in at $2.27 billion and $2.43 per share, up 13.6% and 11.5% from the year-ago value, respectively.
For the quarter ended September 30, 2024, IBM’s revenue is expected to increase 2% year-over-year to $15.04 billion. Its EPS for the same quarter is expected to rise 1% year-over-year to $2.22. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 57.6% to close the last trading session at $221.08.
It’s no surprise that IBM has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has a B grade for Quality. Within the Technology – Services industry, it is ranked #18 out of 75 stocks. To access the additional ratings for IBM’s Growth, Value, Momentum, Stability, and Sentiment, click here.
Workday, Inc. (WDAY)
WDAY provides enterprise cloud applications internationally. Its applications help customers plan, execute, analyze, and extend to other applications and environments to manage their business and operations.
On September 18, 2024, WDAY announced the expansion of Workday Ventures, which made 10 new AI investments since early 2023. These investments focus on innovative AI technologies aimed at enhancing productivity and decision-making for organizations, furthering WDAY’s commitment to advancing the future of work.
On the same date, WDAY launched 12 new Industry Accelerators to help customers in sectors like banking, healthcare, and retail modernize their HR and finance operations. These solutions combine WDAY’s platform with partner expertise to address industry-specific challenges and accelerate digital transformation.
In terms of the trailing-12-month Capex / Sales, WDAY’s 3.05% is 44.3% higher than the 2.11% industry average. Similarly, its 75.77% trailing-12-month gross profit margin is 53% higher than the industry average of 49.54%. In addition, its 19.60% trailing-12-month net income margin is 441.5% higher than the industry average of 3.62%.
For the second quarter that ended on July 31, 2024, WDAY’s total revenues increased 16.7% year-over-year to $2.09 billion. The company’s net income rose 67.1% from the year-ago value to $132 million, and its non-GAAP operating income grew 23% year-over-year to $518 million.
For the same quarter, WDAY’s non-GAAP net income per share increased 22.4% over the prior-year quarter to $1.75. In addition, its free cash flows stood at $516 million, up 43.3% from the previous year’s quarter.
Analysts expect WDAY’s revenue and EPS for the quarter ending October 31, 2024, are expected to increase 14.1% and 14.3% year-over-year to $2.13 billion and $1.75, respectively. WDAY surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 13.8% to close the last trading session at $244.41.
WDAY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It is ranked #21 out of 130 stocks in the Software - Application industry. It has an A grade for Growth and a B for Sentiment and Quality. Beyond what we stated above, we have also rated WDAY for Value, Momentum, and Stability. Get all ratings of WDAY here.
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GOOGL shares were trading at $165.96 per share on Tuesday afternoon, up $0.11 (+0.07%). Year-to-date, GOOGL has gained 19.10%, versus a 20.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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