If we could name one winner during the novel coronavirus pandemic, it would be cloud stocks. Cloud computing has become one of the hottest tech sectors in recent years, and the increase in online activity during the pandemic has pushed this industry to new highs.
Since the pandemic spread across the U.S., workplace collaboration tools became an essential service. And it will only continue to be needed as people remain confined to their homes. That said, the virtual work environment made cloud computing one of the most sought after innovations among tech companies. This infrastructure is known for its high storage capacity and processing horsepower.
However, not all cloud computing businesses are seeing accelerated growth. Companies that serve the airline and hospitality industry have been hit hard by the pandemic, and cloud usage in these sectors remains close to nil.
So with all of that in mind, we’ve compiled a list of the best investments in this industry to help you find the right cloud stocks to invest in. Here are our top seven picks:
- Microsoft (NASDAQ:MSFT)
- Dell Technologies (NYSE:DELL)
- Workday (NASDAQ:WDAY)
- Netflix (NASDAQ:NFLX)
- Adobe (NASDAQ:ADBE)
- Twilio (NYSE:TWLO)
- Amazon (NASDAQ:AMZN)
Let’s dive in!
Hot Cloud Stocks: Microsoft (MSFT)
Microsoft’s cloud technology, Azure, saw some massive gains this pandemic as people continue to work from home for an indefinite period. In the first quarter of 2020, revenue from this service grew a whopping 59%. Microsoft also controls 18% of the cloud market, making it one of the largest cloud infrastructure providers in the world.
In addition to Azure, Microsoft also provides a range of cloud services like Microsoft Teams, Dynamics and video conferencing tools. With this, the company adds to the diversity of the its product portfolio — making it an attractive investment.
However, if Microsoft’s cloud innovations aren’t reason enough to invest in this cloud stock, the company also owns the networking platform LinkedIn and Xbox — which have seen increased growth this year.
Collectively, the versatility of this tech giant’s core business will ensure it remains competitive for many years to come.
Dell Technologies (DELL)
Traditionally a computer technology company, Dell made its debut in the world of cloud computing just a few years ago. And since then, the company has become a leading provider in cloud data servers — along with more niche service offerings through its Dell Technologies Cloud.
Moreover, the tech company owns a majority stake worth about $50 billion in VMware (NYSE:VMW) that operates a number of tools in the cloud. This investment was great news for Dell’s stock price as the company saw a decrease in demand for its core product in the years prior.
However, due to messy entanglement issues, Dell is looking to do a spin-off of VMware versus an outright sellout, which could potentially save millions in tax. So while it is unclear what the future holds for Dell, this cloud stock remains a worthy value investment today.
Hot Cloud Stocks: Workday (WDAY)
Workday operates its cloud services in the human resources realm, and functions as an on-demand tool for businesses looking to hire new employees. In the past few months, the company has seen increased activity in its stock price as more people continue working for home.
Additionally, Workday is poised for success in the coming months, and secured partnerships with two successful companies: Microsoft and Salesforce. The company will be working closely with Microsoft’s Azure platform to develop new technology, and with Salesforce to ensure that the transition to normal working conditions is safe and smooth.
The tech giant saw its revenue increase to $1.02 billion this past quarterm, which shows promise for the future. Thus, I recommend you hold on to this cloud stock as the industry continues to grow in leaps and bounds in the coming years.
Netflix’s successful streaming service has made this company one of the most popular cloud stocks in the world. The pandemic fueled the tech giant’s growth, as its platform gained 10 million customers in the second quarter of 2020 and 26 million total during the first half of the fiscal year
The company’s success can be attributed to the stay-at-home orders, which led people to subscribe to the streaming platform for entertainment. And although Netflix is likely to see a dip in new customers as we move towards a new normal, it will continue to hold its reigning title as king of the streaming revolution. Additionally, Netflix is expanding its reach to international markets as well.
Recently, the company announced its partnership with Microsoft to launch the “Netflix for Games” service this September. Based on a subscription service model, users can play games on the cloud which can be accessed from a PC, smartphone or tablet device. And given the size of the gaming industry, Netflix’s debut in this sector opens up a world of opportunities for the company.
So, with all of that in mind, hold onto this cloud stock and benefit from its long-term gains.
Hot Cloud Stocks: Adobe (ADBE)
Adobe was one of the first companies that made the shift from physical products to the cloud. The company packaged its software as a service that users could access on the cloud via a subscription.
Also, although Adobe is a leader in the cloud computing space, its real strength lies in the diversity of its service portfolio. These include marketing services, customer service tools and analytical tools. In fact, the demand for its services was amplified during the pandemic as the usage of tools like Adobe PDF grew by 40%.
With consistent revenue growth in the last 21 quarters, the company is likely to see an increased demand for its services — as long as remote work remains the norm. Therefore, Adobe’s strong growth potential makes this stock a worthy investment.
Twilio isn’t the first company you think of when it comes to cloud stocks, but the company operates a more specialized service. When you make a call on the Lyft (NASDAQ:LYFT) app or receive texts on Uber (NYSE:UBER) Eats, the technology that enables this is powered by the company.
Twilio’s service has streamlined the use of apps making it easier for a business to communicate with its customers. This is because prior to this, companies had to connect to an external network provider and write custom code to connect with its users.
Now, the service used by more than 50,000 companies like Dell, Lyft and the Red Cross. In fact, Twilio earns 75% of its revenue from a cut from each text or call made using its service and the remaining 25% is from its subscription service.
Collectively, customer activity on apps has increased multifold since the start of the pandemic. In turn, this has been a boon for Twilio stock. The company stock price has increased by 21.8% in July, and 156.2% year-to-date. That said, I recommend you buy into this stock for its future growth.
Hot Cloud Stocks: Amazon (AMZN)
We saved the best for last. Amazon needs no introduction when it comes to cloud computing. The company continues to dominate in this space with control of 33% of the total market. And although its Amazon Web Services (AWS) cloud service did not see gains as high as Microsoft’s Azure this year, it was still a huge revenue driver for the business.
In the past quarter, AWS generated an operating profit of $3.4 billion and a revenue of $10.8 billion. Experts believe that this number will only continue to increase in the coming months and years, and the AWS cloud computing business will be bolstered by Amazon’s e-commerce platform. And as more companies shift to the virtual world, AWS will serve as the platform to host these services.
Additionally, although most companies were forced to move to a remote working environment at the start of the pandemic, this may become the norm for some moving forward. This means that cloud computing services like those offered by Amazon are likely to see its demand increase in multifold in the future.
So, overall, cloud stocks like this one are always a safe bet given the current volatility in the stock market.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020. As of this writing, Divya did not own any of the aforementioned stocks.