As we said before, cloud stocks are the stocks to buy these days. From accessing your photos on your phone to performing complex data analysis at work, hardly a day goes by that you aren’t harnessing the power of the cloud. Cloud computing has taken both the enterprise and consumer world by storm. Plenty of money has been made by investors playing the trend.
It’s in those smaller cloud stocks where future gains can be had. Many of the smaller cloud stocks feature double-digit revenue growth and operate in some necessary niches. Moreover, the growth is showing no signs of slowing as many of the addressable markets for these smaller cloud players are massive. Adding in the buyout potential from larger software stocks and you have a recipe for long-term gains.
When it comes to the cloud, think smaller is better. With that, here are five more cloud stocks to buy with wonderful potential.
Cloud Stocks to Buy: Blackline Inc (BL)Cloud stocks work best when they tackle a boring segment of the business, remove redundancies and simplifying processes. Nothing could be more boring than accounting. And one of the most tedious and time-consuming processes in accounting continues to be the month-end close.
That’s where Software-as-a-Service (SaaS) firm BlackLine (NYSE:BL) comes in.
Right now, most accounting departments collect data on a monthly or quarterly basis and then process it. Transactions are recorded, reconciliations are made, and the journal entries are posted. It creates this blitzkrieg of long hours and sleepless nights each month.
BL’s software is revolutionizing that arduous process. It collects data in real-time and then automatically processes it accordingly. This eliminates the workload and allows accountants to focus on bigger picture things.
It’s no wonder why BL’s sales and customer numbers are surging. Last quarter alone, Blackline managed to score 106 new customers to reach a total of 2,813. Meanwhile, revenues jumped 26% year-over-year. And this isn’t just a one-off thing. BL has had several quarters in a row of new customer and sales growth. Its process works and is helping the firm move quickly towards profitability.
The best part is that the addressable market is huge. There are plenty of companies — both big and small — that will benefit from Blackline’s software. Given the long-term potential, BL could be one of the best cloud stocks to buy for today and tomorrow.
HubSpot (HUBS)These days, it can be hard for businesses and services to score new customers. Inbound marketing firm HubSpot (NASDAQ:HUBS) is making that process of acquiring new customers and keeping existing ones a breeze.
HUBS offers a suite of cloud tools that allow businesses to connect with customers. This includes creating content, sending out emails, social media functions, blogs, marketing automation, and even SEO tools. Its sales and services hubs allow its users the ability to track future potential customers as well as take care of them once they are on board. And it turns out, HubSpot’s platform is very good. More than 60,500 customers — including names like Subaru and Doordash — use it.
The key for HUBS is its business model. The firm uses what’s called a “freemium” model. This allows a business to use some features of HubSpot’s platform gratis. However, extras and additional capabilities require a monthly subscription. The idea is that firms will like what they see and then stick around. And they do: HUBS features retention rates near 100%, while subscription revenues jumped more than 34% last quarter. Clearly, HubSpot’s model is working and it should continue to work.
The firm is profitable and features nearly $1 billion in cash on its balance sheet. This reduces the risk in shares. When it comes to cloud stocks, HUBS is providing a much-needed service to a growing client base and it’s doing it right.
Veeva Systems (VEEV)Given the numerous regulations that govern healthcare, cutting through the clutter can be very hard. It takes a deft hand to dot all the I’s and cross all the T’s. One misstep and the FDA won’t approve a drug, or you’ll end up getting sued by a patient.
Because of this Veeva Systems (NASDAQ:VEEV) is quickly becoming a giant among the cloud stocks.
VEEV produces various applications for the life sciences and biotech industry, drug producers, as well as hospitals. These solutions include everything from collecting trial data during drug development to customer management tools for pharmaceutical companies. From development to commercial processes, VEEV really does it all in healthcare.
Because of the necessity of Veeva’s products, the firm’s customer list reads like a who’s who of biotechs and big pharma. This includes top customers like Merck (NYSE:MRK) and Takeda, which use VEEV’s products across a variety of lines. The best part is they pay some big bucks to do that.
During its last reported quarter, total revenues jumped 25%, while key subscription revenues gained more than 27%. That’s helped Veeva see its profits jump 62% year-over-year. What’s nuts is that VEEV still has plenty of more opportunities to add additional customers and expand. Upselling and new products keep customers coming back for more. Veeva’s future profit potential is very good indeed.
For investors, VEEV is a prime example of how cloud stocks can successfully win in niches.
Zuora Inc (ZUO)
You’ve probably noticed that you’re paying a lot more in subscriptions these days rather than outright ownership. From music and software to even your morning coffee, we’re shelling out plenty of monthly checks to run our lives. Heck, even most of the cloud stocks on this list run on a subscription model. From a business point of view, this reoccurring revenue provides plenty of stable cash flows to build upon.
Helping other companies transition to this subscription economy is Zuora (NASDAQ:ZUO).
ZUO provides SaaS applications that are designed get firms into the subscription mindset. This includes automating recurring billing, collections, quoting, and revenue recognition. Where Zuora differentiates itself is that its software is complimentary to Financial Accounting Standards Board rules. The problem is switching from standard invoicing to subscriptions is difficult when it comes to accounting practices and recognizing revenues over the life of a contract. The cloud stock’s Zuora Billing and Zuora RevPro products allow this to happen with ease and provide real data-driven insight as to what’s happening.
Given that some analysts think even your dishwasher will be run via a subscription in future, ZUO has plenty of potential. It just might take a bit to get there. The stock has struggled recently as it recognizes its sales staff. However, the firm continues to see swift revenue growth from its operations.
This is one cloud stock to buy now for gains later.
Elastic N.V. (ESTC)
ESTC is like Google in that it also operates a search engine. However, the firm doesn’t comb the internet for terms, it looks through the billions of data points companies generate each day. The part that’s exciting is that Elastic’s various products highlight this data via search terms and presents it in an easy-to-read interface. ESTC uses standard API protocols to comb through a firm’s data. This allows users to really take a look at all the various vendors it uses to pull exactly what they need when they need it.
ESTC’s search capabilities can be expanded into applications for consumers as well. Uber (NASDAQ:UBER) uses Elastic’s capabilities to match drivers and riders, while dating app Tinder uses it for a similar function. But the potential is there for both enterprise and consumer-facing applications to dig deep into data for desired outcomes.
And like the early days of GOOG, ESTC is growing like a weed — with revenues increasing at a rate of approximately 70% annually. This has come from both existing customers expanding their relationships with the firm as well as plenty of new additions to its umbrella.
For investors, the addressable market and end use for ESTC’s products are huge and we’re still in the early innings. Given Google’s massive long-term runup, Elastic could be a very fruitful investment.
At the time of writing, Aaron Levitt did not own a position in any of the stocks mentioned.