In this article, we discuss the 10 cloud computing stocks to buy according to Cathie Wood.
Cathie Wood’s ARK Investment Management holds a portfolio value of over $41.6 billion, as of the third quarter of 2021. Cathie Wood currently serves as the CEO and CIO of ARK Investment Management.
Wood’s career as an investor started in California at The Capital Group, where she served as an Assistant Economist. Before founding ARK Investment in 2014, Wood worked at AllianceBernstein as CIO for twelve years and managed over $5 billion.
In 2020, Wood emerged as one of the most successful hedge fund managers, as her ARK Innovation ETF, the flagship exchange-traded fund, gained 150%, due to the spike in tech stocks. However, the ETF fell 17.11% in 2021, leaving all of her holdings in the bear market. Wood expects this loss to be a temporary fall and expects spectacular returns in the coming years. Recently, ARK Investment Management announced the launch of ARK Transparency ETF on Cboe Global Markets. The ETF will track the stock-price movements of the 100 most transparent companies globally.
In this article, keeping in mind the hedge fund’s inclination towards disruptive innovation, we will focus on the cloud computing stocks to buy according to Cathie Wood. Some of the notable stocks in Cathie Wood’s portfolio are Tesla Inc (NASDAQ:TSLA), Square, Inc. (NYSE:SQ), UiPath Inc. (NYSE:PATH), Zoom Video Communications, Inc. (NASDAQ:ZM), Twilio Inc. (NYSE:TWLO), and Palantir Technologies Inc. (NYSE:PLTR).
Cathie Wood of ARK Investment Management
Our Methodology:
The stocks mentioned below are the companies that deal in cloud computing or those that deploy cloud platforms in their operations. For this list, we took into account ARK Investment Management’s 13F portfolio for Q3.
Cloud Computing Stocks to Buy According to Cathie Wood
10. Veeva Systems Inc. (NYSE:VEEV)
Number of Hedge Fund Holders: 44
Veeva Systems Inc. (NYSE:VEEV) is an American cloud computing company that specializes in pharmaceutical and life sciences applications. ARK Investment Management started investing in the company during the fourth quarter of 2020, with a stake worth $82.3 million. In Q3 2021, Veeva Systems Inc. (NYSE:VEEV) accounted for 0.5% of Cathie Wood’s portfolio.
In its Q3 results, Veeva Systems Inc. (NYSE:VEEV) posted an EPS of $0.97, which beats the consensus by $0.09. The company’s revenue for the quarter stood at $476.1 million, presenting a 26.1% year-over-year growth. This October, Stifel initiated its coverage on Veeva Systems Inc. (NYSE:VEEV) with a Buy rating and a $335 price target, highlighting the company’s growth due to changing stock market dynamics.
As per Insider Monkey’s data for Q3, the number of hedge funds having stakes in Veeva Systems Inc. (NYSE:VEEV) stood at 44, the same as in the previous quarter. However, the value of these stakes grew to $1.63 billion, from $1.54 billion in Q2. Among these hedge funds, Arrowstreet Capital was the company’s largest stakeholder in Q3, holding shares worth $282.8 million.
Like Tesla Inc (NASDAQ:TSLA), Square, Inc. (NYSE:SQ), UiPath Inc. (NYSE:PATH), Zoom Video Communications, Inc. (NASDAQ:ZM), Twilio Inc. (NYSE:TWLO), and Palantir Technologies Inc. (NYSE:PLTR), Veeva Systems Inc. (NYSE:VEEV) is also appreciated by investors in the cloud computing space.
9. 2U, Inc. (NASDAQ:TWOU)
Number of Hedge Fund Holders: 22
2U, Inc. (NASDAQ:TWOU) is an American educational technology company that uses a cloud-based SaaS platform for online education.
As of Q3 2021, 22 hedge funds in Insider Monkey’s database reported owning stakes in 2U, Inc. (NASDAQ:TWOU), down from 25 in the previous quarter. The total value of these stakes is over $545.1 million.
Cathie Wood’s ARK Investment Management holds roughly 8.5 million shares in 2U, Inc. (NASDAQ:TWOU) in Q3, which represents 0.67% of the hedge fund’s 13F portfolio. The company’s Q3 results were lauded by BMO Capital, as online education was given wider acceptance due to the pandemic. Recently, the firm set a $40 price target on 2U, Inc. (NASDAQ:TWOU), while maintaining an Outperform rating on the shares.
In addition to TWOU, Cathie Wood’s Q3 portfolio has some other notable names like Tesla Inc (NASDAQ:TSLA), Square, Inc. (NYSE:SQ) and Palantir Technologies Inc. (NYSE:PLTR).
Artisan Partners mentioned 2U, Inc. (NASDAQ:TWOU) in its Q3 2021 investor letter. Here is what the firm has to say:
“2U provides cloud-based services enabling universities and alternative credentialing to launch online education programs. The company’s service—marketing, recruitment, learning and design—is provided in exchange for 60%-80% of tuition revenue (varies by course type). The company has an impressive lineup of customers, including Yale, Harvard, Columbia and London School of Economics. We believe the recent acquisition of edX, the second-largest online learning platform, solidifies 2U’s market leadership and should allow it to capture the single largest share of higher education transitioning from on-campus to online—some estimate the $2.2 trillion global higher education market is only 2% penetrated—and as alternative credentials proliferate and become more accepted.”
8. Trimble Inc. (NASDAQ:TRMB)
Number of Hedge Fund Holders: 34
An American software company, Trimble Inc. (NASDAQ:TRMB) uses a cloud engine that provides next-generation point cloud applications, widely used for tools analysis. Due to its shift to digitization among its customers, recently, Piper Sandler initiated its coverage on Trimble Inc. (NASDAQ:TRMB) with an Overweight rating and a $101 price target.
Recently, Trimble Inc. (NASDAQ:TRMB) partnered with Microsoft to enhance tech adoption and to hasten the digital transformation of the agriculture, construction, and transportation industries. ARK Investment Management started building its position in Trimble Inc. (NASDAQ:TRMB) sometime during Q4 of 2016. As of Q3 2021, the company accounts for 0.87% of Cathie Wood’s portfolio. As of the close of December 9, Trimble Inc. (NASDAQ:TRMB) surged 33.6% year-to-date, while its 12-month returns came in at 40%.
Impax Asset Management held the largest stake in Trimble Inc. (NASDAQ:TRMB) in Q3, worth $653.4 million. Overall, the hedge fund sentiment for the company remained positive in Q3, as 34 hedge funds tracked by Insider Monkey were bullish on the stock, up from 27 in the previous quarter. These stakes hold a consolidated value of $1.81 billion.
7. PagerDuty, Inc. (NYSE:PD)
Number of Hedge Fund Holders: 30
PagerDuty, Inc. (NYSE:PD), an American cloud computing company, surged 10% on December 8, after it beat Q3 estimates on all accounts. The company’s revenue grew by 33% from the prior-year quarter at $72 million. Moreover, PagerDuty, Inc. (NYSE:PD) posted an EPS of -$0.07, beating consensus by $0.02.
At the end of Q3 2021, the number of hedge funds tracked by Insider Monkey having stakes in PagerDuty, Inc. (NYSE:PD) grew to 30, from 26 in the previous quarter. These stakes are valued at over $820 million, up from $656.5 million from Q2.
ARK Investment Management grew its stake in PagerDuty, Inc. (NYSE:PD) by 17% in Q3 and now holds roughly 10 million shares. The company accounts for 0.99% of Cathie Wood’s portfolio. As the company delivered its second consecutive top-line growth of 30%, Craig Hallum, in December, set a $52 price target on PagerDuty, Inc. (NYSE:PD), while maintaining a Buy rating on the shares.
6. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 51
DocuSign, Inc. (NASDAQ:DOCU) is an American company that provides e-signature solutions. The company’s cloud-based platform, The DocuSign Agreement Cloud, allows customers to digitally sign their documents using any device. With over 1 million customers globally, DocuSign, Inc. (NASDAQ:DOCU) remains one of the best cloud computing stocks to buy according to Cathie Wood.
Though the number of hedge funds having stakes in DocuSign, Inc. (NASDAQ:DOCU) decreased in Q3, Wall Street analysts appreciated the company as it starts to recover. Recently, Oppenheimer set a $250 price target on DocuSign, Inc. (NASDAQ:DOCU), while maintaining an Overweight rating on the shares. ARK Investment Management started building its position in the company during the third quarter of 2019, with shares worth only $36,000. As of Q3 2021, the hedge fund holds a $468.9 million worth of stake in DocuSign, Inc. (NASDAQ:DOCU), which accounts for 1.12% of its 13F portfolio.
As of Q3, 51 hedge funds tracked by Insider Monkey reported owning stakes in DocuSign, Inc. (NASDAQ:DOCU), down from 58 in Q2. The total value of these stakes is over $4.23 billion. Among these hedge funds, Tiger Global Management LLC was the company’s leading shareholder in Q3, holding a stake worth $1.88 billion.
Like Tesla Inc (NASDAQ:TSLA), Square, Inc. (NYSE:SQ), UiPath Inc. (NYSE:PATH), Zoom Video Communications, Inc. (NASDAQ:ZM), Twilio Inc. (NYSE:TWLO), and Palantir Technologies Inc. (NYSE:PLTR), analysts and investors are also paying attention to DocuSign, Inc. (NASDAQ:DOCU) in 2021.
Carillon Tower Advisers mentioned DocuSign, Inc. (NASDAQ:DOCU) in its Q2 2021 investor letter. Here is what the firm has to say:
“DocuSign provides electronic signature solutions. The firm reported an excellent quarter and investors have appreciated the strong growth combined with the excellent margins the company has posted. DocuSign has a long runway of growth ahead and we believe that it remains in a favorable position to continue gaining market share from traditional manual and paper-based signature solutions.”
5. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 35
An American software company, Palantir Technologies Inc. (NYSE:PLTR) uses a cloud platform, Apollo, which provides a continuous delivery system, powering other software platforms. This cloud platform offers services in over 40 sectors and industries globally.
As of Q3 2021, ARK Investment Management grew its stake in Palantir Technologies Inc. (NYSE:PLTR) by 22%. The company accounts for 2.14% of Cathie Wood’s portfolio. In its recently announced Q3 results, Palantir Technologies Inc. (NYSE:PLTR) reported revenue of $392.1 million, which beat consensus by $5.54 million. Following the company’s earnings beat, Morgan Stanley lifted its price target on the stock to $24 from $22.
As per Insider Monkey’s Q3 data, the smart money is also taking interest in Palantir Technologies Inc. (NYSE:PLTR), as 35 hedge funds tracked by Insider Monkey were bullish on the company, up from 26 in the previous quarter. These stakes hold a consolidated value of $1.63 billion.
Guardian Fund released its second-quarter 2021 investor letter and mentioned Palantir Technologies Inc. (NYSE: PLTR) in it. Here is what the firm has to say:
“The success of the private sector to innovate in order to help people through the lockdowns and to produce vaccines at record speed at scale has been impressive. The fact that almost every public institution was struggling to be effective no matter how hard some of the people worked, shows the fundamental need of the public sector to become data-driven and invest in data infrastructure.
Government institutions have to partner with enterprises such as Palantir to become digitalnative. The public sector will always struggle to attract the most talented engineers as compensations cannot be justified with tax money and therefore this must be a partnership with specialized private enterprises. This is a great opportunity for Palantir especially as it has already shown to be capable of working with demanding and complex public institutions entrusting it to work on the most critical and sensitive matters.
The news section of Palantir’s website gives insight in where new business is coming from. The main opportunity is in enterprise software and the faster onboarding time and increased self-service of clients is a positive sign. We believe Palantir is becoming one of the more important global software companies.
In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”
4. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 96
Twilio Inc. (NYSE:TWLO) is an American cloud communications platform that allows web developers to programmatically carry out communications using the company’s web service APIs. Recently, Barclays upgraded Twilio Inc. (NYSE:TWLO) to Overweight, with a $375 price target, presenting a 35% upside. Following the firm’s upgrade, the stock surged 3% on December 9.
At the end of Q3, 96 hedge funds in Insider Monkey’s database reported owning a $6.3 billion worth of stake in Twilio Inc. (NYSE:TWLO). In the preceding quarter, 98 hedge funds held stakes in the company, valued at $7.89 billion.
ARK Investment Management made its first investment of $209,000 in Twilio Inc. (NYSE:TWLO) during the fourth quarter of 2016. In Q3 2021, the company constitutes 2.48% of Cathie Wood’s portfolio. In Q3, Twilio Inc. (NYSE:TWLO) posted an EPS of $0.01, beating the consensus by $0.15.
RiverPark Funds mentioned Twilio Inc. (NYSE:TWLO) in its Q3 2021 investor letter. Here is what the firm has to say:
“TWLO shares were also a top detractor for the quarter. Just like after 1Q, despite another quarterly beat in 2Q, management guidance–which we believe to be conservative–disappointed some investors. Second quarter revenue of $669 million was up 67% year over year, significantly exceeding management’s guidance of 47%-50% revenue growth. Management guided 3Q21 revenue to 50%-52% revenue growth, which was ahead of expectations, but due to continued investment also guided to a non-GAAP operating loss of $25 million-$30 million, which was below the Street’s forecast of a $12 million loss.
The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”
3. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 57
An American communications tech company, Zoom Video Communications, Inc. (NASDAQ:ZM) offers services through a cloud-based peer-to-peer software platform. In Q3, the company saw a spike in the number of hedge funds having stakes in it. 57 hedge funds tracked by Insider Monkey were bullish on Zoom Video Communications, Inc. (NASDAQ:ZM), up significantly from 35 in the previous quarter. These stakes hold a consolidated value of roughly $2 billion, up from $670.2 million in Q2.
In Q3, ARK Investment Management increased its position in Zoom Video Communications, Inc. (NASDAQ:ZM) by 21%, and now holds a $2.1 billion worth of stake. The company represents 2.77% of the hedge fund’s 13F portfolio. In Q3, Zoom Video Communications, Inc. (NASDAQ:ZM) posted an EPS of $1.11, beating the analysts’ consensus by $0.01.
Zoom Video Communications, Inc. (NASDAQ:ZM) outperformed low analysts’ expectations in Q3, asserted Meta Marshall of Morgan Stanley, who lifted her price target on the stock to $365 in November, which represents a 40% upside. She kept an Overweight rating on the shares.
Artisan Partners mentioned Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2021 investor letter. Here is what the firm has to say:
“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
2. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 27
In Q3, ARK Investment Management increased its stake in UiPath Inc. (NYSE:PATH) by 102% and currently holds a stake worth $1.2 billion. The company’s cloud-based SaaS solution aids in managing automation work and resources in one place, making it one of the best cloud computing stocks to buy according to Cathie Wood.
In Q3, UiPath Inc. (NYSE:PATH) posted an EPS of $0.00, beating the estimates by $0.04. The company’s revenue for the quarter stood at $220.8 million, experiencing a 49.4% growth from the prior-year quarter. Following the company’s solid earnings, recently, Morgan Stanley upgraded UiPath Inc. (NYSE:PATH) to Overweight, with a $74 price target.
As of Q3, the number of hedge funds tracked by Insider Monkey having stakes in UiPath Inc. (NYSE:PATH) decreased to 27, from 46 in the previous quarter. However, the total value of these stakes stood at $3.62 billion in Q3, up from $3.45 billion in the preceding quarter. Apart from Cathie Wood’s hedge fund, Alkeon Capital Management was one of the prominent stakeholders of UiPath Inc. (NYSE:PATH) in Q3, holding over 12.5 million shares.
ClearBridge Investments released its Q2 2021 investor letter and mentioned UiPath Inc. (NYSE: PATH) in it. Here is what the firm has to say:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
1. Square, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 98
An American financial technology company, Square, Inc. (NYSE:SQ) uses cloud POS software, a web-based point-of-sale system, that enables the users to process payments through the internet.
In Q3, Square, Inc. (NYSE:SQ) is the sixth-largest holding of ARK Investment Management, which holds over 6 million shares in the company, valued at $1.46 billion. Square, Inc. (NYSE:SQ) accounts for 3.52% of Cathie Wood’s 13F portfolio. Recently, BofA upgraded the stock’s price target to $221, while upgrading the shares to Neutral, appreciating the company’s CashApp business.
At the end of Q3 2021, 98 hedge funds tracked by Insider Monkey reported owning stakes in Square, Inc. (NYSE:SQ), up from 94 in the previous quarter. These stakes hold a consolidated value of over $8.8 billion.
RiverPark Funds mentioned Square, Inc. (NYSE:SQ) in its Q1 2021 investor letter. Here is what the firm has to say:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
You can also take a look at 14 Best Cloud Computing Stocks To Invest In and 10 Cloud Software Stocks with Strong Growth Potential
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Disclosure. None. 10 Cloud Computing Stocks to Buy According to Cathie Wood is originally published on Insider Monkey.
