Cloud computing plays an important role in the modern economy, helping businesses scale, innovate and streamline operations through agility and cost-efficiency. Companies leveraging cloud solutions will thrive as the demand for digital transformation in sectors increases, creating lucrative investment opportunities.
Therefore, investors in digital economy like Oracle Corporation (ORCL), ServiceNow, Inc. (NOW), Okta, Inc. ( OKTA ) is a strong cloud computing stock to look at.
Cloud computing has revolutionized identity management and security, automating enterprise services worldwide. Business operations have been streamlined thanks to software applications, storage, databases and cyber security innovations. As a result, the software market is projected to grow at a CAGR of 5.3% from 2024 to 2028 to reach $858.10 billion.
According to IDC, cloud infrastructure spending is expected to grow at a double-digit rate, reaching $213.7 billion by 2028, highlighting the growing importance of the cloud. As cloud reliance intensifies, software security is critical to securing computers, managing access control, and protecting against threats. The security software market is expected to grow by 13.9% from 2024 to 2030 and reach nearly $58.6 billion.
Hence, due to increased focus on cloud computing for efficient data management and workflow optimization, confidence in the cloud computing market is increasing. Now, let’s take a closer look at the basics of cloud computing stocks mentioned above.
Oracle Corporation (ORCL)
ORCL offers products and services that address global enterprise IT environments. The company provides cloud software applications, cloud-based business solutions, application licenses, infrastructure technologies, databases, Java, middleware, hardware products, and consulting and customer services.
Based on trailing 12-month FCF margin, ORCL’s 19.21% is 84.6% higher than the industry average of 10.41%. Likewise, the stock’s trailing-12-month EBIT margin of 30.45% is 511.9% higher than the industry average of 4.98%. Also, the stock’s trailing-12-month net income margin of 20.40% is 436% higher than the industry average of 3.81%.
For the fiscal first quarter ended August 31, 2024, ORCL’s total revenue rose 6.9% year-on-year to $13.31 billion. Likewise, its operating income was $3.99 billion, up 21.1% from the previous year’s figure. Also, its net income and EPS were $2.93 billion and $1.03, respectively, representing an increase of 21% and 19.8% over the prior-year quarter.
The Street expects ORCL’s revenue and EPS to grow 9% and 10.3% year-over-year to $14.10 billion and $1.48 billion, respectively, for the quarter ending Nov. 30, 2024. It beat consensus EPS estimates in three of the trailing four quarters. Shares gained 53% year-to-date to close the last trading session at $161.31.
ORCL’s POWR ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. POWR Ratings evaluate stocks by 118 different factors, each with its own weighting.
It is ranked #25 out of 125 stocks in the Software – Applications industry. It graded A for sentiment and B for stability and growth. Click here to view ORCL’s growth, value and momentum estimates.
ServiceNow, Inc. (Now)
Now provides enterprise cloud computing solutions to define, configure, integrate, manage and automate services for organizations worldwide. The company operates the Now platform for workflow automation, artificial intelligence, machine learning, robotic process automation, process mining, performance analytics, electronic service catalogs and portals, data standardization, encryption, etc.
On September 10, 2024, Agentic just announced the integration of AI with its platform to improve 24/7 productivity across IT, customer service, HR and more. New AI agents will use advanced reasoning for deeper situational understanding, while NOW’s Assist Skill Kit will allow companies to build and deploy custom GenAI skills.
On July 24, 2024, NOW and Boomi announced a partnership to improve customer experiences through AI-driven self-service solutions. Boomi streamlines support and self-service using NOW’s platform, while ServiceNow will integrate Boomi’s API management capabilities for better API visibility and management.
Based on the trailing-12-month net income margin, now 11.51% is 202.5% higher than the industry average of 3.81%. Its 6.29% trailing-12-month return on total assets is 203.3% higher than the industry average of 2.08%. Also, its trailing-12-month capex/sales ratio of 7.98% is 278.8% higher than the industry average of 2.11%.
For the second quarter ended June 30, 2024, NOW’s non-GAAP total revenue increased 22.5% year-over-year to $2.64 billion. Its non-GAAP gross profit rose 23.1% from the year-ago quarter to $2.17 billion. Its non-GAAP net income rose 34% year over year to $651 million. Also, the company’s non-GAAP earnings per share were $3.13, representing a year-over-year increase of 32.1%.
Analysts expect NOW’s EPS to grow 18.2% year-over-year to $3.45 for the quarter ending September 30, 2024. Its revenue is expected to grow 20% year over year to $2.75 billion in the same quarter. It beat consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44.8% and closed the last trading session at $877.57.
NOW’s positive outlook is reflected in its POWR ratings. It is ranked #15 out of 39 stocks in the B-Rated Software – Business industry. It has a B grade for development, feel and quality. To view NOW’s value, momentum and stability ratings, click here.
Okta, Inc. (OKTA)
OKTA operates internationally as an identity partner. The company offers a suite of products and services to manage and secure identities, including single sign-on, adaptive multi-factor authentication, API access management, access gateway and Okta device access.
Based on trailing 12-month FCF margin, OKTA’s 31.19% is 199.7% higher than the industry average of 10.41%. Similarly, its trailing-12-month gross profit margin of 75.82% is 53% higher than the industry average of 49.56%.
For the second quarter ended July 31, 2024, OKTA’s total revenue increased 16.2% year-over-year to $646 million. The company’s non-GAAP gross profit increased 18.9% from the prior-year figure to $528 million. During the same quarter, OKTA’s non-GAAP net income was $131 million, or $0.72 per share, an increase of 133.9% and 132.3%, respectively, over the prior-year quarter.
For the quarter ending October 31, 2024, OKTA’s revenue and EPS are expected to grow 11.2% and 32.7% year-over-year to $649.65 million and $0.58 million, respectively. OKTA beat Street EPS estimates in each of the four quarters. Over the past nine months, the stock has gained 3.9% and closed the last trading session at $73.58.
OKTA’s strong fundamentals are reflected in its POWR ratings. It has a B grade for development. In the Software – Security industry, it ranks #9 out of 23 stocks. To access more POWR ratings for OKTA for value, momentum, stability, sentiment and quality, click here.
What to do next?
Steve Rietmeister, a 43-year investment veteran, has released his 2024 market outlook along with a trading plan and top 11 picks for the year ahead.
2024 Stock Market Outlook >
ORCL shares traded up $4.27 (+2.72%) at $161.45 a share Thursday afternoon. Year-to-date, ORCL is up 54.66%, compared to an 18.28% rise in the S&P 500 index over the same period.
About the Author: Abhishek Bhuyan
Abhishek started his professional journey as a financial journalist due to his interest in identifying fundamental factors that influence the future performance of financial instruments. More…
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