In this article, we will discuss the 5 best cloud computing stocks for 2022. If you want to read our detailed analysis of these stocks, you can go directly to the 12 Best Cloud Computing Stocks For 2022.
5. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Funds: 73
Snowflake Inc. (NYSE:SNOW) is a supplier of data warehousing platforms that leverages cloud technology. The Bozeman, Montana-based organization caters to over 5,400 customers and has 250 petabytes (PB) of data under management. The company’s leading offering is the Data Cloud that allows organizations to collate data and utilize it to obtain meaningful information.
Snowflake Inc. (NYSE:SNOW) reported strong Q3 2021 results that outperformed consensus revenue and EPS estimates. The corporation reported revenue of $334.4 million and a loss per share of 51 cents per share. In comparison, analysts anticipated the company to report revenue of $306.1 million with a loss per share of 61 cents. Furthermore, Snowflake Inc. (NYSE:SNOW) reported a CRPO of $1.8 billion, an increase of 94% from the same quarter last year.
On December 2, Tyler Radke at Citi upgraded the stock from a Neutral to a Buy rating and increased the target price on Snowflake Inc. (NYSE:SNOW) from $299 to $470. The analyst highlighted that the growth of the organization is at an “inflection point” following the “very strong” Q3 2021 results.
In its Q3 2021 investor letter, RiverPark Funds shared its stance on Snowflake Inc. (NYSE:SNOW). Here’s what the investment management firm said:
“Following torrid second-quarter results, Snowflake, a position we initiated in March, was also a top contributor for 3Q. The company reported 103% year-over-year product revenue growth, 169% net revenue retention and a 74% non-GAAP gross margin, up 700 basis points year over year. Management also raised guidance to 92% product revenue growth for the full year.
Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. Incremental warehouse data capacity and renewals are expected to be stored off-premises on cloud servers, with more than 75% of databases projected to move to the cloud by 2022, resulting in a nearly $100 billion market.
Snowflake provides complex data management and analytical tools for its customers, eliminates the need for users to manage infrastructure, is fully scalable for each customer, and can be run on any of the Amazon, Microsoft, or Google cloud platforms. The company also has a unique, customer-aligned billing model based on usage. With the company’s capital expenditure-light model—Snowflake uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in the SNOW management team, which previously had an enormously successful run guiding one of our other core Cloud software
holdings, ServiceNow.”
4. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Funds: 73
Palo Alto Networks, Inc. (NASDAQ:PANW) is a cybersecurity company that provides advanced firewalls and cloud-based products and services that secure clouds, mobile devices, and networks. The Santa Clara, California-based corporation has more than 85,000 customers spread across over 150 countries.
On November 23, Joseph Bonner at Argus increased the price target on Palo Alto Networks, Inc. (NASDAQ:PANW) from $530 to $620 and maintained a Buy rating on the stock. The analyst commented that the recent cybersecurity attacks have highlighted the significance of strong cybersecurity in place across every level of government and the private sector. Bonner added that the importance of cybersecurity rose further after the Presidential Executive Order in May 2021. The analyst positions Palo Alto Networks, Inc. (NASDAQ:PANW) as a distinguished and robust player in the extremely disjointed but swiftly growing enterprise cybersecurity industry.
Out of the 867 hedge funds being tracked by Insider Monkey, 73 reported owning a stake in Palo Alto Networks, Inc. (NASDAQ:PANW) at the end of Q3, up from 69 in the last quarter.
Palo Alto Networks, Inc.’s (NASDAQ:PANW) stock price has increased by over 49% in 2021, outperforming the S&P 500 Index and First Trust Cloud Computing ETF (NASDAQ:SKYY), which experienced an increase of 27% and 15%, respectively.
3. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Funds: 95
Adobe Inc. (NASDAQ:ADBE) is a software company that is transforming itself into a software-as-a-service (SaaS) cloud provider. Adobe Creative Cloud and Adobe Experience Cloud are leading the company’s efforts in that direction. The San Jose, California-based organization, is known for providing a wide range of software required for the creation and publication of content with millions of users globally.
On November 22, Peter Hazel at Atlantic Equities upgraded Adobe Inc. (NASDAQ:ADBE) from a Neutral to an Overweight rating and increased the price target from $600 to $820. The analyst thinks that as a result of the Creative Cloud platform, Adobe Inc. (NASDAQ:ADBE) is in a “dominant position” in the industry. Adobe Inc. (NASDAQ:ADBE) also has high pricing power on its side that will aid it in maintaining its market share. The company is expected to experience revenue growth in the mid-teens along with expansion in margins.
2. Twilio Inc. (NYSE:TWLO)
Number of Hedge Funds: 96
Twilio Inc. (NYSE:TWLO) is a cloud communications platform as a service (CPaaS) organization that provides customer engagement platforms to numerous organizations and more than ten million developers globally.
On December 16, Kash Rangan at Goldman Sachs started coverage of Twilio Inc. (NYSE:TWLO) with a Buy rating and a $350 price target. In a research note issued to investors, the analyst shared that the $19 billion cloud total addressable market in 2020 indicates a cloud penetration of 7% in 2020. Kash expects the rate to rise to 29% in 2025. According to the analyst, Twilio Inc. (NYSE:TWLO) is at the core of client engagement, and the pandemic further elevated the company’s value proposition by highlighting the benefits of its stack.
In addition to this, ARK investment bought nearly 400,000 shares of Twilio Inc. (NYSE:TWLO) following the sell-off. Of the 867 hedge funds being tracked by Insider Monkey, 96 reported owning a stake worth $6.37 billion in Twilio Inc. (NYSE:TWLO) at the end of Q3 2021.
1. Salesforce.com inc. (NYSE:CRM)
Number of Hedge Funds: 119
Salesforce.com inc. (NYSE:CRM) is known for providing cloud-based software products and services. The San Francisco, California-based company founded in 1999 is one of the pioneers in the cloud computing industry and has been able to grow through acquisitions and from innovation within.
Salesforce.com inc. (NYSE:CRM) reported mixed Q3 2021 results on November 30. Revenue was $6.86 billion compared to the consensus estimate of $6.8 billion. Adjusted EPS for the quarter was $1.27, as opposed to the analysts’ forecast of 92 cents. Salesforce.com inc. (NYSE:CRM) anticipates revenue to be around $7.22 billion to $7.23 billion and an adjusted EPS of 72 cents to 73 cents in Q4 2021.
Of the 867 hedge funds in Insider Monkey’s database, 119 owned a stake in Salesforce.com inc. (NYSE:CRM) at the end of Q3, up from 108 in the preceding quarter.
In a research note issued on December 1, Brent Thill at Jefferies highlighted that Salesforce.com inc. (NYSE:CRM) reported “solid results” for Q3 2021 as it outperformed CRPO, revenue, and EPS estimates. The analyst reiterated a Buy rating with a $360 price target.
Vulcan Value Partners discussed its stance on Salesforce.com inc. (NYSE:CRM) in its Q3 2021 investor letter. Here’s what the investment management firm said:
“Salesforce.com Inc., a material contributor for the quarter, is the dominant provider of customer relationship management (CRM) software and technology. Salesforce has high retention rates, pricing power, a large and growing addressable market, high free cash flow, and a competitive moat. The company continues to execute well, and we believe the global pandemic has only improved its prospects and future returns.”
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