Cloud computing plays a critical role in the modern economy by enabling businesses to scale, innovate, and streamline operations through agility and cost-efficiency. Companies leveraging cloud solutions are set to thrive as demand for digital transformation grows across sectors, creating lucrative investment opportunities.
Hence, investors should consider watching robust cloud computing stocks like Oracle Corporation (ORCL), ServiceNow, Inc. (NOW), and Okta, Inc. (OKTA) in the digital economy.
Cloud computing has revolutionized identity management and security, automating enterprise services worldwide. Thanks to software applications, business operations have been streamlined through storage, databases, and cybersecurity innovations. As a result, the software market is projected to grow at a 5.3% CAGR from 2024 to 2028, reaching $858.10 billion.
According to IDC, cloud infrastructure spending is projected to grow at a double-digit rate, reaching $213.7 billion by 2028, highlighting cloud's increasing significance. As cloud reliance intensifies, software security becomes crucial for protecting systems, managing access control, and defending against threats. The security software market is expected to grow at 13.9% from 2024 to 2030, reaching nearly $58.6 billion.
Hence, with the increasing focus on cloud computing for efficient data management and workflow optimization, there is growing optimism in the cloud computing market. Now, let’s take a closer look at the fundamentals of the cloud computing stocks mentioned above.
Oracle Corporation (ORCL)
ORCL offers products and services that address enterprise information technology environments worldwide. The company provides cloud software applications, cloud-based industry solutions, application licenses, infrastructure technologies, databases, Java, middleware, hardware products, and consulting and customer services.
In terms of the trailing-12-month levered FCF margin, ORCL’s 19.21% is 84.6% higher than the 10.41% industry average. Likewise, the stock’s 30.45% trailing-12-month EBIT margin is 511.9% higher than the 4.98% industry average. Also, the stock’s 20.40% trailing-12-month net income margin is 436% higher than the 3.81% industry average.
For the fiscal first quarter ended August 31, 2024, ORCL’s total revenues increased 6.9% year-over-year to $13.31 billion. Likewise, its operating income was $3.99 billion, up 21.1% from the year-ago value. Furthermore, its net income and EPS stood at $2.93 billion and $1.03, respectively, representing increases of 21% and 19.8% over the prior-year quarter.
Street expects ORCL’s revenue and EPS for the quarter ending November 30, 2024, to increase 9% and 10.3% year-over-year to $14.10 billion and $1.48, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has 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, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #25 out of 125 stocks in the Software - Application industry. It has an A grade for Sentiment and a B for Stability and Growth. Click here to see ORCL’s Growth, Value, and Momentum ratings.
ServiceNow, Inc. (NOW)
NOW provides enterprise cloud computing solutions that define, structure, consolidate, manage, and automate services for enterprises 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 benchmarking, encryption, etc.
On September 10, 2024, NOW announced the integration of Agentic AI into its platform to enhance 24/7 productivity across IT, customer service, HR, and more. The new AI agents will use advanced reasoning for deep contextual understanding, while the NOW’s Assist Skill Kit will allow organizations to build and deploy custom GenAI skills.
On July 24, 2024, NOW and Boomi announced a partnership to enhance customer experiences through AI-driven self-service solutions. Boomi will use NOW’s platform to streamline support and self-service, while ServiceNow will integrate Boomi's API Management capabilities for better API visibility and governance.
In terms of the trailing-12-month net income margin, NOW’s 11.51% is 202.5% higher than the 3.81% industry average. Its 6.29% trailing-12-month Return on Total Assets is 203.3% higher than the 2.08% industry average. Also, its 7.98% trailing-12-month Capex / Sales is 278.8% higher than the industry average of 2.11%.
During the second quarter ended June 30, 2024, NOW's non-GAAP total revenues rose 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 came in at $3.13, representing an increase of 32.1% year-over-year.
Analysts expect NOW's EPS for the quarter ending September 30, 2024, to increase 18.2% year-over-year to $3.45. Its revenue for the same quarter is expected to grow 20% year-over-year to $2.75 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 44.8% to close 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 Growth, Sentiment, and Quality. To see 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 for managing and securing identities, including Single Sign-On, Adaptive Multi-Factor Authentication, API Access Management, Access Gateway, and Okta Device Access.
In terms of the trailing-12-month levered FCF margin, OKTA’s 31.19% is 199.7% higher than the 10.41% industry average. Similarly, its 75.82% trailing-12-month gross profit margin is 53% higher than the industry average of 49.56%.
In the second quarter that ended on July 31, 2024, OKTA’s total revenues rose 16.2% year-over-year to $646 million. The company’s non-GAAP gross profit increased 18.9% from the year-ago value to $528 million. For the same quarter, OKTA’s non-GAAP net income was $131 million, or $0.72 per share, marking increases of 133.9% and 132.3% over the previous year’s quarter, respectively.
For the quarter ending October 31, 2024, OKTA’s revenue and EPS are expected to increase 11.2% and 32.7% year-over-year to $649.65 million and $0.58, respectively. OKTA surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 3.9% to close the last trading session at $73.58.
OKTA’s strong fundamentals are reflected in its POWR Ratings. It has a B grade for Growth. Within the Software – Security industry, it is ranked #9 out of 23 stocks. To access the additional POWR Ratings for OKTA for Value, Momentum, Stability, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ORCL shares were trading at $161.45 per share on Thursday afternoon, up $4.27 (+2.72%). Year-to-date, ORCL has gained 54.66%, versus a 18.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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