With the market plunging, it’s hard to find anything positive about the coronavirus-induced selloff. But there are some pockets of “green shoots.” As the viral outbreak continues to spread, many people around the world are now experiencing social distancing, work from home environments and other changes to their daily lives. That change has the potential to make several cloud computing stocks some big bucks over the next few quarters.
And the shift could be permanent.
The beauty of cloud stocks is that they allow workers, consumers and businesses to use their products/software from anywhere in the world. Simply, by just logging in via an app or on your computer. Given the shift to working from home and other societal changes due to the virus, several cloud stocks could win over the long haul. After all, there may not be a reason to bring business travel back if virtual meetings work well during the corona-crisis.
We could be witnessing a complete change in how we function as a society. And these three cloud computing stocks could be some of the biggest winners.
RingCentral Inc (RNG)
The term “social distancing” is now part of our lexicon. And that includes the workplace environment. As we trade in our cubicles for our kitchen tables, keeping in contact with our fellow employees and supervisors is paramount. Teleconferencing firm Zoom Video (NASDAQ:ZM) has already gotten the nod from investors as a top play in this area. But it’s not alone and rival RingCentral Inc (NYSE:RNG) could be an equally powerful play on the theme.
Like ZM, RNG offers a cloud-based suite of communications tools. This runs from the basic dial-into-a-phone meeting to more advanced team chat functions. The best part is that RingCentral’s products allow users to access the cloud from a variety of devices. This has already proven itself as a powerful tool for business communication. The proof has been in its recent results.
For full-year 2019, RNG’s sales increased 34% to clock in at $902 million. This continues to be driven by juicy subscription revenues and the appeal of its unified communication offerings. The best part is that RNG continues to rack-up more customers and big contracts. During its last conference call, CEO Vlad Shmunis mentioned that the firm was able to close on a record 30 deals that were worth seven figures or more. Even better was the bulk of the sales were from new customers.
With the coronavirus now causing more employees to work from home, RNG could see an influx of new sales over the next quarter or so. And once hooked, the chances are good that they’ll stay in RingCentral’s system for the long haul. This should boost the stock and make it profitable on a GAAP-basis rather than just an adjusted basis.
As a growing way to play the new work-from-home environment, RNG could be one of the best cloud stocks to buy.
Veeva Systems (VEEV)
Given that this is a health crisis, Veeva Systems (NYSE:VEEV) could quickly emerge as a top cloud computing stock for dealing with the outbreak. 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. This focus on healthcare will allow it win on two fronts during the crisis.
First, on vaccine and drug therapy creation to fight the virus. While the Food and Drug Administration has agreed to fast track development/approval of coronavirus medicines, it will still take a lot to get that done. Drug companies still need to dot all the I’s and cross all the T’s to make sure the vaccine is safe and effective. VEEV offers a host of products that helps meets compliance through the trial process. With top drug makers like Gilead (NASDAQ:GILD) working on new coronavirus therapies, Veeva’s offerings become more important.
Secondly, VEEV wins on the hospital management front. With everything from masks to drugs being rationed and limited, keeping track of what supplies and drugs are available for patients is now very critical. It’s here, that Veeva could see some serious growth as more hospitals are forced to face “doomsday” scenarios and ration their goods. Its two recent buyouts of Crossix and Physicians World, plug right into this side of the equation.
For VEEV, it all means continued revenue growth. Already, VEEV’s revenue increased 28% last fiscal year to $1.1 billion. For the fourth quarter, that number jumped by 34%. But with more need for VEEV’s products, those numbers could jump significantly on the coronavirus outbreak.
Dropbox (DBX)
The current nature of work is all about collaboration. People from accounting, finance, communication and creative departments all work together to build products and services. And in the current environment, this bodes well for cloud computing stock Dropbox (NYSE:DBX).
DBX originally started as an easy way for individuals to back up their photos and videos in the cloud. That function is still here and as a result, the firm is one of the largest file-sharing platforms in the world. However, sensing the commoditized nature of online storage, Dropbox took a page from rival Box (NASDAQ:BOX) and moved into the business world.
The firm now offers a variety of subscription and collaborative document operations for small- and medium-sized businesses. The key is that DBX can be accessed via a variety of means — from desktop applications and mobile computing. Better still, the platform is pretty open source and allows for plenty of third-party apps for editing, communicating and more. Dropbox has also added plenty of chat and video capabilities to this platform for live meetings while in a document.
The end result is a powerful platform that’s proving to be successful. Both the fourth quarter and full fiscal 2019 showed sales jumping by 19%. Better still is that margins have grown and paying customers are adding more services to their subscriptions. That has actually helped the cloud stock become cash flow positive.
With the coronavirus causing a separation among teams, DBX could see its star shine as more businesses use its service to get work done.
After given up early mornings and late nights as an analyst for a life of sweatpants, Aaron Levitt has been an investment/personal finance writer for nearly fifteen years. Aside from contributing to InvestorPlace, his work can be found on Investopedia, Kiplinger’s Personal Finance and Mitre Media’s family of websites. You can follow his picks, pans and general market musings on Twitter via @AaronLevitt. As of this writing, he did not hold a position in any of the aforementioned securities.
