Below you can see the 5 best cloud computing stocks to buy. For a detailed discussion as well as a more comprehensive list please see the top 10 cloud computing stocks to buy.
5. Netflix, Inc. (NASDAQ: NFLX)
Netflix, Inc. (NASDAQ: NFLX) is the 5th most popular cloud stock in our list with a total of 113 hedge funds. Netflix provides subscription streaming entertainment services around the world. The company has a market capitalization of $214B. Its stock price increased 50% so far this year.
The streaming giant is one of the biggest beneficiaries of the COVID-19 pandemic, gaining 10.1 million paying customers in the second quarter. The company has added 26 million new subscribers during the first half of this year in contrast to 28 million new subscribers for the whole of 2019. Ensemble Capital talked about Netflix in its Q2 2020 Investor Letter, a copy of which you can download here. You can read their lengthy comments about Netflix in this article.
4. Alibaba Group (NYSE:BABA)
Alibaba is the fourth most popular cloud computing stock among hedge funds. It will probably become a trillion dollar company over the next couple of years. There were a total of 154 hedge funds with bullish Alibaba positions at the end of June. We just shared Polen Capital’s views about Alibaba in this article today. Billionaire Dan Loeb is also very bullish about Alibaba and shared his bullish BABA thesis in this article.
3. Alphabet Inc (NASDAQ:GOOGL)
Alphabet’s main business is internet search and advertising, but its cloud computing is also growing very strongly and expected to be a major contributor to the search giant’s bottom line over the next few years. During the second quarter, Google Cloud generated a total revenue of $3 billion, growing at a 43% rate. GOOGL was in the portfolios of 157 hedge funds at the end of June. Ensemble Capital briefly talked about Alphabet Inc in this article.
2. Microsoft Corp (NASDAQ:MSFT)
Microsoft’s cloud revenue is a monster in comparison to Alphabet’s. Microsoft’s CFO Amy Hood projected total cloud computing revenues between $12.55 billion and $12.8 billion for its upcoming earnings announcement. Microsoft generated total cloud computing revenues of $11.4 billion a year ago. So, its cloud division is growing at a 10-12% rate at the moment. That’s probably why MSFT is a more valuable company than GOOGL at the moment but we believe Google Cloud will close the gap over the next few years.
By the way, Microsoft is the second most popular cloud computing stock in our list. Microsoft is also the second most popular stock among hedge funds. There were a total of 222 hedge funds with bullish MSFT positions in their portfolios at the end of June. This means one out of every 4 hedge funds had bullish MSFT positions right now. Brown Advisory recently talked about MSFT in its Q2 2020 Investor Letter, a copy of which you can download here. You can read their comments in this article.
1. Amazon.com (NASDAQ:AMZN)
Amazon is the #1 cloud computing stock to buy according to hedge funds. There were a total of 248 hedge funds (30% of all equity hedge funds) with bullish Amazon positions at the end of June. Amazon’s AWS unit generated a total revenue of $10.8 billion during the second quarter with an annual growth rate of 29%. Stunning! Amazon’s cloud business is probably worth at least $500 billion as a stand alone company.
Qualivian Investment Partners recently released its Q2 2020 Investor Letter, a copy of which you can download here. Here is what they said:
“Amazon: AMZN shares, along with many other eCommerce participants, have been on a strong run this year, outperforming the S&P 500 materially since February. COVID is pulling forward years of eCommerce migration and AMZN is the big winner with a commanding share of key US and European markets – potentially even gaining share from an already dominant market position. Alongside this, cloud migration should continue to accelerate as the costbenefit of outsourcing to the cloud dominates in-hosting. Operating cash flow increased 42% last quarter to $51.2 billion for the trailing twelve months ended June 30, 2020. Amazon Web Services grew revenue at 29% last quarter and operating income grew by 58%. The internet infrastructure is effectively an oligopoly with AMZN as the biggest player. AMZN is currently trading at a price to operating cash flow ratio of 30X. This multiple does not incorporate the optionality that AMZN has as a dominant online and infrastructure platform. AMZN has multiple growth options going forward, some resulting from its enormous and hard to replicate advantage of free user data, together with the increasing application of artificial intelligence to that data. AMZNs competitive advantage is getting stronger. The key risks are regulatory and political.”
