For technology investors, it’s important to separate hype from reality. That’s because for every true “disruptor” that revolutionizes an industry, there are dozens of imitators riding a lot of hot air.
A segment of the technology market that continues to live up to the hype, however, is cloud computing.
Almost a decade ago, Silicon Valley was giving us breathless predictions of how this trend would reshape the global economy. It turns out, the promise of this high-tech trend turned out to be as revolutionary as advertised.
Consider that the global public cloud market will hit $178 billion this year. Also noteworthy is that figure is up from $146 billion in 2017, according to Forrester Research, growing at a 22% annual rate.
Or better yet, consider the performance of the First Trust Cloud Computing ETF SKYY, +0.46% The fund has surged about 190% since its 2011 inception vs. about 110% for the S&P 500 Index SPX, -0.40% And that momentum doesn’t show any sign of slowing, with SKYY up almost 40% in the past 12 months, compared with 15% for the S&P 500.
If you want to play one of the most powerful tech trends, then, don’t fall for the hype of bitcoin BTCUSD, +3.62% or other fads. Stick with the durable and still impressive growth in cloud computing, via these nine top stocks in the industry.
Akamai Technologies AKAM, +0.47% is a “content delivery network” services provider for media and software companies. In a nutshell, those providers use Akamai’s worldwide infrastructure to serve up the news sites, videos and other content that we interact with every day rather than serving everything off local and in-house servers.
AKAM has surged 60% in the last year, including a big leg up in December after activist investor Paul Singer of Elliott Management disclosed a 6.5% stake in the stock. Singer contends there were numerous “operational and strategic” opportunities to maximize value. Even in the absence of any big structural moves, AKAM is still tracking 9% revenue growth both this fiscal year and next.
Whats’ there to say about Amazon.com AMZN, +0.36% and its Amazon Web Services cloud arm that hasn’t already been said? Despite its current dominance, growth is still spectacular with revenue jumping 48% in its most recent quarter to a more than $20 billion annual rate.
There are admittedly other elements to Amazon stock, from its fresh foods push after the Whole Foods acquisition to its streaming video goals and everything in between. But don’t shortchange the power of its cloud computing arm as a driver of growth and profits.
Yes, boring old Cisco Systems CSCO, +0.16% is going strong in the age of cloud computing! In fact, the shares are up almost 40% in the last 12 months thanks in part to a movement toward selling cloud computing network gear that is in high demand.
It’s strengthening its position, too, with the $1.9 billion acquisition of cloud software player Broadsoft at the end of 2017. An approach that has enabled CSCO to benefit from its reach in legacy businesses even as it evolves with cloud computing trends has paid off lately for shareholders.
Equinix Inc. EQIX, -3.12% hasn’t exactly set the world on fire lately with its share price like some of these other names. However, structured as a real estate investment trust, or REIT, it’s not exactly made for capital appreciation; instead, it pays a dividend of 2.1% that is growing nicely — jumping from 34% from the end of 2015.
But how does a REIT qualify as a cloud computing stock, you ask? Because the dividends are derived from rent paid at its data centers across five continents, that’s how.
F5 Networks FFIV, +1.24% has surged almost 40% in the last 12 months, thanks in large part to the cloud revolution. After all, FFIV is focused on the delivery, security and performance of network applications — in other words, it makes a cloud network run better and safer.
Its success is evidenced both in its share price, and the projections of 14% EPS growth this fiscal year and forecasts of another 9% next year. When you can take roughly double-digit profit expansion to the bank year after year, that shows you’re doing more than just riding a tech fad.
You may not think of Intuit Inc. INTU, +0.14% when you think tech stocks. However, the cloud-based accounting platform of QuickBooks is a case study in how digital solutions can really revolutionize businesses to enhance productivity and profitability.
That’s particularly true in this “gig economy” where self-employed Americans abound and small businesses are easier than ever to start up than ever before. With 15% top-line growth this year and 25% expansion in earnings, Intuit is clearly using the reach of a cloud computing age to maximum advantage.
Routing and networking hardware company Juniper Networks Inc. JNPR, +0.18% hasn’t broken out like some of these other names in the last several months, owing to disappointing margins and slowing growth. However, JNPR remains a key player in the cloud computing market.
Some investors have been impatient for an acquisition, considering its digestible $10 billion market cap (at least, compared with the deep pockets of Big Tech companies). However, the company is gunning for “stand alone success” in 2018, as evidenced by shifts in recent years toward continued growth in data centers and cloud services.
Just as the value of Amazon as key player is self-evident, so should the might of Microsoft Corp. MSFT, -0.45% be clear in the age of cloud computing. From its Azure cloud services platform to the more straightforward business of collecting regular revenue from cloud-based Office 365 software.
Microsoft has been rejuvenated as a result of CEO Satya Nadella’s focus on these cloud operations in recent years, and it shows. MSFT stock is up 45% in the last 12 months, and up roughly 200% since former exec Steve Ballmer announced in late 2013 he was stepping down.
Another old favorite in the cloud computing space is Salesforce.com CRM, +0.18% a company that was at the forefront of the “software as a service” trend. Its enterprise software platforms are the gold standard in many industries, and its subscription-based model ensures that a steady flow of cash keeps coming from operations.
And even after all this time at the forefront of cloud computing and with tons of hype behind it, CRM stock still is delivering. This fiscal year, sales will jump 25% and next year they will increase an additional 20%. No wonder the stock is up 250% in the last five years, including 60% or so in the last 12 months alone.
Another popular name that has lived up to its very lofty expectations is VMware Inc. VMW, +1.70% The network infrastructure company is at the very center of the cloud computing revolution, offering security and data management tools that are the gold standard. It also has a crucial relationship with Amazon Web Services announced last year, where VMware software can be applied to AWS based on the specific use cases of individual businesses.
Shares are up nearly 70% in the last 12 months amid momentum from this partnership that was announced at the end of 2016. Not only has the effort rejuvenated VMware stock, but EPS should jump about 19% this fiscal year, too. And who knows, if the partnership bears fruit, there may be an acquisition in the near future that boosts the shares even further.