Cloud Software Stocks Gaining Traction: 5 Join The Fray
Zacks Investment Research | Sep 17, 2019 10:35PM ET
The cloud software space is benefiting from widespread digital transformation and rapid evolution of cloud computing, which is dramatically reshaping the way enterprises conduct business.
Notably, cloud software or application is a program where cloud-based and local components work together. The application tasks may encompass email, file storage and sharing, order entry, inventory management, word processing, CRM, data collection, or financial accounting.
What’s Favoring Cloud Software Players?
With demand for cloud-based solutions only growing, enterprises are turning to software companies to provide the digital infrastructure they need to keep up with the online world. Therefore, enterprise cloud software is a space that has massive growth opportunity as digital enterprise management has become a necessity to compete in any industry. This is creating more demand for web-based performance management monitoring tools that are not only scalable but also suitable for cloud-based environments.
In addition, the strong adoption of SaaS cloud-computing model presents significant growth opportunity for industry players. SaaS offers a flexible and cost-effective delivery method of applications and the deployment time is also much shorter than legacy systems.
Notably, Gartner estimates the worldwide public cloud services market to grow 17.5% in 2019 to $214.3 billion, up from $182.4 billion in 2018. Cloud system infrastructure services are likely to record the highest growth of 27.5% in 2019 and cloud software is likely to witness growth of more than 22% this year compared with a rise of 6% for all other Software forms, adds Gartner.
However, market volatility and increasing worldwide regulations related to data privacy, and data protection and accessibility do not bode well for the industry participants.
Stocks to Watch Out
Let’s dive in and see how a few of these cloud-based software stocks have performed so far in 2019.
PagerDuty (PD) provides digital operations management solutions. It leverages digital signals to report incidence within a firm’s digital infrastructure that needs to be addressed. This is a niche business and if properly executed, could yield great returns.
PagerDuty went public in April with an IPO price of $24, which immediately jumped to $38.25 when it hit the public markets. The stock is now trading at $30.63, down 22.4% on a year-to-date basis.
PagerDuty currently carries a Zacks Rank #2. The Zacks Consensus Estimate for fiscal 2020 has stayed at a loss of 37 cents over the last seven days. Revenues are pegged at $163.5 million, which indicates year-over-year growth of 38.7%.
Domo, Inc. (NASDAQ:DOMO) helps clients make sense of vast amounts of data by structuring it into manageable insights on an intuitive platform. It makes decision-making faster for corporations, thus creating revenue opportunities.
Domo also carries a Zacks Rank #2. The stock is down 9.5% on a year-to-date basis.
Moreover, the Zacks Consensus Estimate for fiscal 2020 has stayed at a loss of $4.03 over the last seven days. Revenues are pegged at $168.3 million, which indicates year-over-year growth of 18.1%.
Veeva Systems Inc. (NYSE:VEEV) offers cloud-based solutions for the pharmaceutical and life sciences industries. The growing demand for cloud-based vault applications, product launches, an industry-focus approach, need-oriented products and international expansion are the key positives.
Further, the Zacks Consensus Estimate for fiscal 2020 earnings remained at $2.11 over the past week. Revenues are pegged at $1.07 billion, which indicates year-over-year growth of 23.7%.
Veeva carries a Zacks Rank #3. It is now up 66.5% on a year-to-date basis.
HubSpot ( (NYSE:HUBS) ) provides companies with SaaS. It delivers cloud-based businesses services with its segments, including Marketing Hub, Sales Hub, Service Hub, and a free CRM system. The stock is now up 30.3% on a year-to-date basis.
The stock carries a Zacks Rank #3.
HubSpot’s full-year consensus estimate for earnings stayed put at $1.41 over the past week. Meanwhile, its full-year revenues are expected to climb 29.6% to reach $664.9 million.
Sydney, Australia-based Atlassian (TEAM) is engaged in designing, developing, licensing and maintaining of software and the provisioning of software hosting services. The stock is up 50.1% on a year-to-date basis.
The stock carries a Zacks Rank #3. Its full-year revenues are expected to climb 28.4% to reach $1.55 billion. The Zacks Consensus Estimate for fiscal 2020 earnings has remained steady at $1.01 over the past seven days.
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