While many have heard of the term “cloud computing” before, few understand what it means. In its generic form, it refers to the practice of using a network of remote servers hosted on the internet to store, manage and process data/programs — rather than doing it with a local server or personal computer.
Over the past few years, we’ve really seen a big push to adopt the technology across many businesses and organizations. With exponential growth in data and the complexity of formats used, the opportunity exists for those competing in the space to provide the computing intelligence required to ensure that daily operations go uninterrupted.
According to Centaur Partners, cloud-based business applications are likely to grow from $13.5 billion in 2013 to $32.8 billion this year, reflecting a compounded annual growth rate of 19.5%.
With the cloud-computing industry becoming more lucrative than ever, we’ll use Profit Scanner to review a few key players to see if it makes sense to buy in and stake a claim.
Cloud Computing Wars: NetApp Inc. (NTAP)
NetApp (NTAP) is a provider of data-management solutions, simplifying the complexity of storing, managing, protecting and retaining enterprise data in a way that helps its clients reduce cost and minimize risk.
In the chart above, NTAP is trapped in a downward trend, often going through large price swings that smooth out over a longer time frame. More recently, three intermediate-term events — price below 50-day moving average, symmetrical continuation triangle and price crossing below 21-week moving average — have all been bearish. The first occurred back on April 8, when NTAP was trading at $25.81 per share.
The company’s strengths can be found in its solid financial position, with reasonable debt levels and improving profit margins. Unfortunately, net income has seen some deterioration, and operating cash flow has been less than stellar as well.
Given the longer-term trajectory of the stock and recent bearish sentiment, investors wishing to go long may want to keep a safer distance until the stock begins to make higher price highs again.
Cloud Computing Wars: Red Hat Inc (RHT)
Many think of Red Hat (RHT) as the group behind open-source software and services, like the Linux operating system. So, they might be surprised to find that the company also has a firm footprint in the cloud computing space as well, with hybrid cloud solutions that span both on-premise and off-premise resources to deliver the “best of both worlds” service to customers.
With recent price activity found above the lows made in late August 2015, the stock has been range bound, and no definitive trend is emerging.
Consolidation at this point is justified when you consider the fact that the company has gone through two periods of major price expansion, one in 2009–2010 and another in 2014–2015, taking the stock from near single digits to almost $83 per share to close out 2015. And now the stock simply needs a break.
Any pullback from here will most likely have less to do with the performance of the company itself, and more to do with profit-taking from investors who may be looking to revisit the stock once shares have retraced to attractive levels again.
Cloud Computing Wars: Equinix Inc (EQIX)
Equinix (EQIX) is a networking company that connects businesses with partners and customers worldwide through a global platform of data centers. Now, unlike the previous two companies, EQIX is actually breaking out of a two-year consolidation period, charting new price highs in the process.
That said, Profit Scanner powered by Recognia has been bullish on the stock since Feb. 19, back when shares were trading for $299.37. And it was around that time when the system picked up on a price move above the 21-week moving average, confirming that the opportunity to get in at a discount was quickly fading.
On March 11, we had another bullish signal hit as the stock began to break out of an intermediate-term ascending continuation triangle pattern, with a target move in the $369–$381 price range.
While the current price is already up to $330.17 (10.28% higher), hitting the conservative end of the range from here would add another 11.76% of profits to the bottom line.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.