The COVID-19 pandemic has ushered in a significant workplace transformation, with the increased use of smart technologies accelerating Industry 4.0–the so-called fourth industrial revolution. As organizations have adapted to a remote working culture and emphasized migrating their workloads from traditional channels to digital formats, the cloud computing market has gained traction. Companies are rapidly adopting cloud solutions and services to enhance their businesses and stay abreast of the evolving industry and market environments.
The global cloud computing market was valued at $368.97 billion in 2021 and is expected to expand at a 15.7% CAGR from 2022 - 2030. “There is no business strategy without a cloud strategy,” asserted Milind Govekar, a vice president at Gartner. Furthermore, Gartner predicts that more than 85% of organizations will embrace a cloud-first strategy by 2025.
Given this backdrop, we think cloud-computing stocks, VMware, Inc. (VMW), Akamai Technologies, Inc. (AKAM), Dropbox, Inc. (DBX), SPS Commerce, Inc. (SPSC), and Box, Inc. (BOX) solid bets this month.
Click here to check out our Cloud Computing Industry Report for 2022
VMware, Inc. (VMW)
VMW is a Palo Alto. Calif.-based information technology company that develops and applies virtualization technologies. It offers multi-cloud, networking, digital workspace, and intrinsic security solutions. The company also has strategic alliances with Amazon Web Services to develop and deliver an integrated hybrid solution.
On March 10, 2022, the company announced that it would work with Amazon Web Services (AWS), a public cloud partner, to make purchasing and deploying VMWare Cloud as easy and fast as possible on AWS. This should help expand its customer base.
Earlier this year, VMW and HCL Technologies, a leading global technology company, expanded their partnership to deliver integrated solutions like 5G Core and VMware RAN to service providers. VMW expects this partnership to help it to accelerate the modernization efforts of service providers and hence monetize their services faster.
VMW’s total revenue increased 7.2% from the prior-year quarter to $3.53 billion in its fiscal fourth quarter, ended Jan. 28, 2022. Its subscription and SaaS revenue for the quarter came in at $868 million, reflecting a 22.8% increase year-over-year, while the combination of subscription and SaaS and license revenue stood at $1.90 billion, up 11% year-over-year.
The Street expects VMW’s revenue for the current quarter, ending April 31, 2022, to come in at $3.19 billion, indicating a 6.5% increase year-over-year. Also, the company’s revenue is expected to grow 7.1% year-over-year to $13.76 billion in its current fiscal year. Also, it has an impressive earnings surprise history; it topped Street EPS estimates in each of the trailing four quarters.
The stock has gained marginally in price intraday to close the last trading session at $114.01.
VMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating. Which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
VMW has a B grade in Quality and Value. It is ranked #2 of 58 stocks in the Software - Business industry.
Beyond what is stated above, we have also rated VMW for Momentum, Stability, Sentiment, and Growth. Get all the VMW ratings here.
Click here to check out our Software Industry Report for 2022
Akamai Technologies, Inc. (AKAM)
AKAM provides cloud services to secure, deliver, and optimize content and business applications over the internet in the United States and internationally. The Cambridge, Mass., company offers solutions to keep the infrastructure, websites, applications, interfaces, and users safe from online threats and cyberattacks and to improve performance. Its solutions include the Security Technology Group and the Edge Technology Group.
On Feb. 15, 2022, AKAM announced its agreement to acquire Linode, one of the most trusted and easy infrastructure-as-a-service (IaaS) platform providers. The company aims to leverage Linode’s cloud computing capabilities to create a unique cloud platform to build, run and secure applications from the cloud to the edge. Thus, this acquisition might prove strategic for AKAM.
AKAM’s revenue increased 7% year-over-year to $905.36 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations grew 45.7% from its year-ago value to $196.09 million, while its net income improved 41.6% year-over-year to $160.53 million. Its EPS increased 42.6% from its year-ago value to $0.97.
Analysts expect AKAM’s revenue for the first quarter, ending March 31, 2022, to be $905.03 million, indicating 7.4% year-over-year growth. The company’s EPS is expected to increase 3% year-over-year to $1.42. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 13.7% in price to close yesterday’s trading session at $109.53.
AKAM’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
AKAM is also rated B in Growth, Value, and Quality. It is ranked #7 in the Software - Business industry.
To see additional POWR Ratings for Momentum, Stability, and Sentiment for AKAM, click here.
Dropbox, Inc. (DBX)
San Francisco-based DBX provides a content collaboration platform that allows individuals, teams, and organizations to sign up and collaborate through its website or app. The company serves customers in the professional, technology, media, education, industrial, retail, and financial services industries, with approximately 700 million registered users as of Dec. 31, 2021.
DBX’s revenue increased 12.2% year-over-year to $565.50 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its paying users totaled 16.79 million compared to 15.48 million for the same period last year, while the average revenue per paying user was $134.78, versus $130.17 in the prior-year quarter. Its net income improved 136% year-over-year to $124.60 million. And its EPS increased 138.1% from its year-ago value to $0.32.
The $0.38 consensus EPS estimate for its fiscal first quarter, ending March 31, 2022, represents a 7.5% improvement year-over-year. And the $559.03 million consensus revenue estimate for the same quarter represents a 9.3% increase from the same period last year. In addition, the company topped the Street’s EPS estimates in each of the trailing four quarters.
DBX’s stock has slumped marginally in price to close the last trading session at $21.09.
It is no surprise that DBX has an overall rating of B, which equates to Buy in our POWR Ratings system.
DBX has an A grade in Quality and a B in Growth and Value. It is ranked #8 of 77 stocks in the Technology – Services industry.
In addition to the POWR Ratings I have just highlighted, one can see the DBX ratings for Momentum, Stability, and Sentiment here.
Note that DBX is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
SPS Commerce, Inc. (SPSC)
SPSC provides cloud-based supply chain management services that help retailers, suppliers, grocers, and logistics firms to manage item data and omnichannel orders, optimize sell-through performances, and automate business transactions. The Minneapolis, Minn., company’s cloud-based platform offers various services, including Fulfillment, Analytics, and Other Solutions.
SPSC’s revenue increased 23.3% year-over-year to $102.76 million in its fiscal fourth quarter, ended Dec.31, 2021. Its gross profit improved 19% year-over-year to $67.12 million over the period, while its income from operations increased 13.4% from its year-ago value to $15.37 million.
SPSC’s revenue for the current quarter is expected to come in at $104.56 million, indicating 16.1% year-over-year growth. The company’s EPS is expected to increase 9.8% year-over-year to $0.47 for the same quarter. SPSC also beat the consensus EPS estimates in the trailing four quarters.
SPSC stock has gained 23.1% in price over the past year and 3.2% over the past five days to close the last trading session at $128.04.
The company has an overall B rating, which translates to Buy in our proprietary ratings system.
SPSC is also rated B in Growth, Quality, and Sentiment. Within the Software – Application industry, it is ranked #27 of 164 stocks.
Click here to see additional POWR Ratings for Value, Momentum, and Stability for SPSC.
Box, Inc. (BOX)
BOX in Los Altos, Calif., provides a cloud content management platform that enables organizations to manage, secure, and share content from anywhere, on any device. The company’s Software-as-a-Service platform allows users to collaborate on content internally or externally and manage it for developing custom applications and industry-specific capabilities through its web, mobile, and desktop applications.
This month, Mast-Jägermeister SE, the producer and marketer of top-selling premium liqueur brand Jägermeister partnered with BOX for cloud content management. Also, Japan Post has selected BOX as its content cloud platform for securely sharing information both internally and externally with business partners. These collaborations demonstrate BOX’s solid positioning in the industry.
Last month , BOX announced the general availability of an enhanced Box for Slack integration that enables customers to use Box as the single file storage system in the Slack environment. “With today’s announcement, thousands of Box and Slack joint customers will have more time to get work done, thanks to boosted efficiency and productivity, as well as constant assured security,” said Diego Dugatkin, Chief Product Officer at Box. Earlier, BOX announced the general availability of an enhanced Box for Microsoft Teams integration that enables customers to select Box as the default cloud content management solution in the Teams environment, enhancing customer experience.
For its fiscal fourth quarter, ended Jan. 31, 2022, BOX’s revenue increased 17.3% year-over-year to $233.36 million. Its gross profit grew 20.2% from its year-ago value to $168.68 million. Billings for the quarter stood at $337.90 million, reflecting a 9% increase year-over-year. Furthermore, as of January 31, 2022, its remaining performance obligations were $1.10 billion, up 19% from its remaining performance obligations as of Jan.31, 2021, of $896.90 million.
The Street expects BOX’s EPS for its fiscal first quarter, ending April 31, 2022, to improve 39.4% year-over-year to $0.25. The 234.49 million consensus revenue estimate for the same quarter represents a 15.8% increase from the same period last year. And the company surpassed the consensus EPS estimates in all the trailing four quarters.
BOX’s shares have gained 23.2% in price over the past year to close the last trading session at $26. The stock has gained 11.1% in the past six months.
BOX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our POWR Ratings system.
The company also has an A grade in Growth and Quality and a B in Value. The stock is ranked #4 in the Technology – Services industry.
To get BOX’s ratings for Momentum, Stability, and Sentiment, click here.
Click here to check out our Cloud Computing Industry Report for 2022
VMW shares were trading at $111.57 per share on Friday afternoon, down $2.44 (-2.14%). Year-to-date, VMW has declined -3.72%, versus a -10.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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