The cloud computing sector has been a beacon of brilliance on Wall Street radar, captivating investors with its potential for innovation and expansion. In a recent survey, it was revealed that a staggering 94% of major global companies have embraced cloud computing, leveraging its scalability, cost-efficiency, and security advantages. This digital metamorphosis, from traditional IT frameworks to cloud platforms, offers an unparalleled agility and adaptability that traditional structures lack.
Cloud platforms are not stagnant; they are vibrant, constantly evolving, and offering a bouquet of services that go beyond the mundane. With artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), and advanced analytics, cloud providers are not just collaborators but catalysts for company advancement in modern times.
The First Trust Cloud Computing ETF (NASDAQ:SKYY) has exemplified this dynamism, registering over 12% growth year-to-date, showcasing investors’ fervent demand for exposure to the cloud computing arena. Riding this wave of enthusiasm, let’s explore three stellar cloud computing stocks that analysts predict could outshine the competition in the third quarter of 2024.
Amazon (AMZN)
Amazon’s omnipresence in the e-commerce realm is legendary, but its dominance extends far beyond retail into the clouds with Amazon Web Services (AWS). AWS has firmly established itself as a formidable player in the cloud computing arena, providing a comprehensive suite of on-demand services ranging from storage to machine learning.
Amazon’s first quarter of fiscal year 2024 heralded a success story, with net sales scaling a commendable 13% year-over-year (YOY) to $143.3 billion. Of particular note was the 17% surge in AWS revenue to $25 billion, while net income and diluted EPS skyrocketed around 220% to $10.4 billion and 98 cents, respectively.
In a strategic move, AWS unveiled Amazon Q, a potent generative artificial intelligence (GenAI) assistant designed to revamp software development tasks. The trajectory of AMZN stock in 2024 has been nothing short of meteoric, surging over 30% year-to-date, perched at 41.2 times forward earnings and 3.5 times sales. Analysts’ consensus 12-month price target of $220 for AMZN signals a promising 10% upside potential.
Microsoft (MSFT)
Microsoft, a stalwart in operating systems and productivity suites, has seamlessly transitioned into the cloud era with Microsoft Azure. Azure’s rich tapestry of cloud solutions, from virtual machines to AI tools, has been a game-changer.
In a robust fiscal third-quarter report, Microsoft’s revenue surged by 17% YOY to $61.9 billion, fueled by the soaring demand for Microsoft Cloud services, which raked in $35.1 billion. Profitability also saw an upswing, with net income and diluted earnings per share climbing 20% to $21.9 billion and $2.94, respectively.
Microsoft Azure’s innovation continued with the introduction of Azure Bastion’s new stock keeping unit (SKU), Bastion Developer, a secure and cost-effective solution streamlining access to Azure Virtual Machines. MSFT stock has shimmered with a more than 22% surge year-to-date, currently trading at 43.3 times forward earnings and 14.4 times sales. Wall Street’s 12-month median price forecast of $480 for MSFT signals a promising 5% upside.
ServiceNow (NOW)
ServiceNow, while not a direct cloud computing infrastructure provider, nurtures a specialized cloud-based software-as-a-service platform targeting enterprise workflow management. Its “Now Platform” orchestrates digital workflows, automating IT operations processes and enhancing operational efficiency.
In the first quarter of 2024, ServiceNow presented robust financials, with total revenues soaring past $2.6 billion, marking a 24% YOY growth. Moreover, net income reached $707 million, with diluted EPS at $3.41, showcasing stability and growth.
ServiceNow’s strategic collaboration with Microsoft demonstrates this resilience, integrating their GenAI capabilities to boost user support. The stock has seen a nearly 12% uptick YTD, valued at a premium 56.4 times forward earnings and 17.2 times sales. With analysts setting a 12-month price target of $850 for ServiceNow stock, an approximate 8% upside is on the horizon.
In conclusion, the cloud computing sector is primed for a radiant July 2024, with Amazon, Microsoft, and ServiceNow leading the charge. These companies not only symbolize technological prowess but also embody the essence of innovation and adaptability, attributes that resonate deeply with investors in today’s ever-evolving digital landscape.
