Yahoo Finance Cloud Computing Dependency on the Rise: Buy 4 Stocks With Upside
In the digital era, companies are increasingly relying on cloud computing to improve efficiency, smooth functioning, scalability and flexibility in their operations. The growing acceptance of cloud computing has made it one of the most in-demand avenues in the tech industry.
Cloud computing companies have been performing exceptionally well since 2023 as tech stocks have been driving the broader market rally. The Federal Reserve’s jumbo rate cut of 50 basis points should further help growth stocks including cloud computing.
Given the growing demand and the bright prospects, it would be ideal to invest in cloud computing-centric stocks that are likely to provide impressive returns in the near term. Four such stocks are Datadog, Inc. DDOG, NetApp, Inc. NTAP, International Business Machines Corporation IBM and Fortinet, Inc. FTNT.
Each of these stocks has seen positive earnings estimate revisions in the past 60 days and carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cloud Computing Industry Overview
Cloud computing refers to the on-demand seamless access of computing resources such as servers, storage, databases, networking, software, analytics and intelligence over the Internet (the cloud) on a pay-per-use pricing model. It marks a paradigm shift from traditional on-premises infrastructure storage to remote cloud-based storage facilities and relies heavily on virtualization and automation technologies.
Instead of buying, owning and maintaining physical data centers and servers, organizations access a virtual pool of shared resources on an as-needed basis from a cloud service provider. This lowers operating costs, increases productivity with greater agility and flexibility, and improves scalability with higher economies of scale.
Cloud Services Stocks Gaining Prominence
According to the International Data Corporation’s (IDC) Worldwide Semiannual Public Cloud Services Tracker, global revenues for the public cloud services market totaled $669.2 billion in 2023, jumping 19.9% year over year.
This indicates that companies are increasingly outsourcing their server, storage and networking needs, avoiding the high costs of building and maintaining their own IT infrastructure.
Cloud Services Stocks With Growth Potential
Datadog, Inc.
Datadog, Inc. is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. DDOG’s business runs around its portfolio of over 400 out-of-the-box integrations including public cloud, private cloud, on-premise hardware, databases and third-party software.
Datadog generates revenues from the sale of subscriptions to customers using its cloud-based platform.DDOG simplifies and provides monitoring services for cloud-scale applications, which include monitoring of servers, databases, tools and services, through a SaaS-based data analytics platform.
Datadog’s expected earnings growth rate for the current year is 23.5%. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the past 60 days. DDOG presently carries a Zacks Rank #2.
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NetApp, Inc.
NetApp, Inc. provides enterprise storage as well as data management software and hardware products and services. NTAP assists enterprises in managing multiple cloud environments, adopting next-generation technologies like artificial intelligence, Kubernetes, and contemporary databases, and navigating the complexity brought about by the quick development of data and cloud usage.
NetApp is witnessing higher demand from customers for its portfolio of modern all-flash arrays, especially the C-series capacity flash and ASA block-optimized flash. The new all-flash A-series is also picking up momentum. NTAP expects the new AFF A-series, along with its C-series and ASA products, to capture further share in the all-flash market.
Netapp’s expected earnings growth rate for the current year is 9.6%. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. NTAP presently sports a Zacks Rank #1.
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International Business Machines Corporation
International Business Machines Corporation has gradually evolved as a provider of cloud and data platforms.IBM is betting big on the watsonx platform, which is likely to be the core technology platform for its AI capabilities. Increased demand for Hybrid Platform & Solutions, Red Hat, Automation and Transaction Processing is acting as a tailwind.
International Business Machines is benefiting from strong demand for hybrid cloud and AI, driving growth in Software and Consulting. IBM’s growth is expected to be driven primarily by analytics, cloud computing, and security in the long haul.
International Business Machines’ expected earnings growth rate for the current year is 5%. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the past 60 days. IBM currently has a Zacks Rank #2.
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Fortinet, Inc.
Fortinet, Inc. is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide.
Fortinet is benefiting from rising demand from large enterprise customers and growth in the company's security subscriptions. FTNT also gaining from the robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings. Higher IT spending on cybersecurity is further expected to aid Fortinet in growing faster than the security market.
Fortinet’s expected earnings growth rate for the current year is 23.3%. The Zacks Consensus Estimate for current-year earnings has improved 14.2% over the past 60 days. FTNT currently sports a Zacks Rank #1.
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International Business Machines Corporation (IBM) : Free Stock Analysis Report
NetApp, Inc. (NTAP) : Free Stock Analysis Report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
Datadog, Inc. (DDOG) : Free Stock Analysis Report
