The Dow, S&P 500, and Nasdaq all hit new intraday highs Thursday on the back of U.S.-China trade war positivity. This week, House Democrats also announced their support for the USMCA trade deal to replace NAFTA. Meanwhile, corporate earnings growth is set to return next year, which could help send stocks even higher in 2020 as U.S. unemployment rests at 50-year lows.
With this in mind, now appears to be a good time for investors to search for stocks for 2020. One industry that seems sure to expand for years to come is technology. And within the broader tech space, cloud computing remains a growth-heavy sector.
Most investors already know about the big players such as Amazon AMZN and its AWS, along with Microsoft MSFT, IBM IBM, Google GOOGL, and other tech giants. Meanwhile, cloud-based business services and software firms have expanded and it’s not just Salesforce CRM that has grown rapidly amid the larger technological transitions for businesses and other enterprises.
With this in mind, we found three cloud-focused software stocks using our Zacks Stock Screener that investors might want to consider buying for 2020…
Veeva Systems Inc. VEEV
Veeva Systems offers cloud-based solutions for the pharmaceutical and life sciences industries. Veeva’s software-as-a-service model helps deliver industry-specific tools for customer relationship management, content management, and many other enterprise applications. And Veeva topped our third-quarter fiscal 2020 earnings and revenue estimates in late November.
Peeking ahead, our current Zacks estimates call for the firm’s full-year fiscal 2020 sales to surge 26.5% to $1.09 billion. The company’s fiscal 2021 revenue is then projected to jump another 27.3% higher to reach $1.39 billion. Both of these figures would top 2019 and 2018’s roughly 25% top-line expansion.
At the bottom end of the income statement, the cloud company’s adjusted FY20 earnings are expected to surge 33% to $2.17 per share. In a sign of continued expansion, Veeva’s full-year fiscal 2021 EPS figure is projected to climb another 17% higher to $2.53 a share.
VEEV shares have skyrocketed 155% over the last two years to crush its Internet Software Market’s 15% average climb. Veeva is also up 60% in 2019 but it has moved mostly sideways during the last three months. This might actually set up a better buying opportunity for investors high on Veeva as it rests roughly 20% off its highs at the moment. VEEV holds a Zacks Rank #3 (Hold), but has seen its longer-term earnings estimate revisions climb completely upward following its Q3 release.
Anaplan, Inc. PLAN
Anaplan develops cloud platforms for business applications for everything from finance to supply chains. The goal is to help customers, of which it has more than 1,300 customers worldwide, improve their planning and decision-making in real time. Anaplan topped our Q3 fiscal 2020 earnings and revenue estimates in November, with sales up 44% and subscription revenue up 47%. The San Francisco, California-based firm was also recently named to Deloitte’s 2019 Technology Fast 500 list.
PLAN shares have climbed over 100% since the firm went public in October of 2018 and are up 90% in 2019. This crushed its Internet Software Market’s average, which climbed only 16% this year. Like VEEV, Anaplan stock has slowed down, up 3.5% in the last three months to lag the S&P 500’s 6% move. PLAN stock opened trading Friday at $50.29 per share, which is 17% off its highs and could give the stock more space to expand heading into 2020 and beyond.
Anaplan is still firmly in its growth phase and it is projected to report a full-year fiscal 2020 loss of -$0.48 per share. But this would come in far better than last year’s -$0.73 loss, with this positivity expected to continue next year. On top of that, PLAN has seen its longer-term consensus earnings estimates surge recently to help it earn a Zacks Rank #1 (Strong Buy). Anaplan’s fiscal 2020 revenue is projected to jump over 44% to $346.8 million, with 2021 expected to come in 33% higher at $461.1 million.
Zuora, Inc. ZUO
Zuora provides cloud-based software on a subscription basis that aims to help firms transition to their own subscription-focused models. The company hopes to capitalize on the rise of everything from Netflix NFLX to Adobe ADBE. Zuora’s tagline is “The World Subscribed” and it sees the global economy transitioning more and more toward a subscription model. The firm has worked with everyone from cybersecurity firm Carbonite CARB to Caterpillar CAT.
Mountain View, California-headquartered ZUO, which was founded in 2007 and went public in the spring of 2018, works with over 900 companies and its revenue surged 40% last year. The stock hasn’t impressed investors since its early surge. But Zuora has crushed our quarterly earnings estimates by an average of 25% over the trailing four periods. This includes a 33% Q3 earnings beat on December 5, when it also raised its current full-year (2020) sales guidance.
Our current Zacks estimates call for ZUO’s fiscal 2020 revenues to surge over 18% to $277.7 million, with 2021 projected to jump 20% higher to reach $332 million. Meanwhile, it is expected to post a much smaller loss this year (-$0.33 vs. -$0.55), with its 2021 loss projected to shrink to -$0.19. Zuora is currently a Zacks Rank #2 (Buy) that sports an “A” for Momentum in our Style Scores system.
ZUO is trading under $15 per share, which marks a 40% discount compared to its 52-week highs. Plus, the beaten-down stock is trading at 4.9X forward 12-month sales estimates, which marks a discount against its industry’s 5.7X average. Therefore, Zuora might be a ‘cheap’ tech stock to take a chance on for 2020.
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Click to get this free report International Business Machines Corporation (IBM) : Free Stock Analysis Report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Netflix, Inc. (NFLX) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report Veeva Systems Inc. (VEEV) : Free Stock Analysis Report Carbonite, Inc. (CARB) : Free Stock Analysis Report Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report Microsoft Corporation (MSFT) : Free Stock Analysis Report salesforce.com, inc. (CRM) : Free Stock Analysis Report Caterpillar Inc. (CAT) : Free Stock Analysis Report Zuora, Inc. (ZUO) : Free Stock Analysis Report Anaplan, Inc. (PLAN) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research