3 Cloud Computing Stocks to Supercharge Your Portfolio

3 Cloud Computing Stocks to Supercharge Your Portfolio

Growth investing can be very rewarding if you choose the right stocks.

A key method for finding such companies is to seek out enduring trends that should persist well into the future.

For instance, the pandemic has greatly accelerated digital adoption for both individuals and businesses, resulting in a surge of online activity in the last 18 months.

Industries such as cloud computing, social media and online payments that were already present before the crisis received a massive boost as people consumed voracious amounts of data.

Telecommuting has also made businesses more digital-ready, enabling them to reach out to a wider audience through the internet.

Cloud computing, in particular, will confer long-term benefits to a wide swath of businesses as they adopt the subscription model to run their operations.

Gone are the days when companies purchased software and then paid a fee for vendors to update it.

Services are now delivered over cloud platforms and businesses pay a monthly or annual fee to use these platforms.

Here are three promising cloud computing stocks that can help to supercharge your portfolio’s returns.

Adobe (NASDAQ: ADBE)

You would probably be familiar with the portable document format (PDF) which has become ubiquitous on almost all computers.

However, the company that came up with the PDF, Adobe, has other services up its sleeve.

Adobe is a software-as-a-service (SaaS) platform that offers a plethora of services to businesses.

Creative Cloud provides a suite of creative apps and services that companies can tap on for graphic design and illustrations used for photography, video and web design.

Experience Cloud provides analytical tools to clients and helps deliver real-time insights on their customers.

And Document Cloud helps to digitise a range of documents into PDF and other formats to smoothen clients’ workflows. Electronic signatures are also part of the package to help streamline the agreement signing process.

Adobe continues to record strong financial numbers for its fiscal 2021 third quarter (3Q2021).

Revenue grew by 22% year on year to US$3.9 billion while gross profit climbed by 24% year on year to US$3.5 billion.

The gross margin rose from 86.8% to 88.1% during the quarter.

Net profit improved by 27% year on year to US$1.2 billion.

The remaining performance obligations (RPO) were US$12.6 billion, up 22% year on year, representing healthy growth in future revenue.

Salesforce.com (NYSE: CRM)

Salesforce is the number one customer relationship management (CRM) software provider by revenue.

The company offers a wide range of tools and apps on its integrated platform to help its clients gain a holistic view of their customers.

With these insights, customers can then design better marketing campaigns and coordinate with their sales and IT teams to deliver lasting value that increases customer retention.

For its fiscal 2022 second quarter (2Q2022) ended 31 July 2021, Salesforce reported a 23% year on year jump in revenue to US$6.3 billion.

Operating profit jumped 87% year on year to US$332 million.

RPO stood at US$36.2 billion, up around 18% year on year, and the company estimates that its third-quarter revenue will grow by 25% year on year.

During its recent Investor Day, Salesforce highlighted that its total addressable market is set to grow by 13% per annum from 2021 to 2025 to reach US$248 billion.

With this market size, the company will have more than ample room for many more years of steady growth.

Salesforce has also completed its acquisition of Slack which the company believes will help integrate its multiple services into one single platform.

Okta (NASDAQ: OKTA)

Okta serves up its Identity Cloud service to organisations to enable them to manage user access rights and privileges.

Armed with over 7,000 pre-built integrations to apps and infrastructure providers, Okta helps to provide secure access to the right people within the organisation.

The company’s 2Q2022 revenue surged by 57% year on year, of which subscription revenue soared by 59% year on year to US$303 million.

RPO stood at US$2.2 billion, up 57% year on year, and Okta currently has around 13,000 customers.

The business enjoys a 124% dollar-based net retention rate as of 31 July 2021, meaning customers, on average, spent 24% more with Okta than they did the previous year.

Elsewhere, Okta has concluded its US$6.5 billion acquisition of Auth0, a leading identity platform for application teams, back in May.

The company has wasted no time in introducing new features for both Auth0 and Okta on its Identity Cloud services such as device authorisation grant and branding.

Okta has identified a total addressable market of around US$80 billion that it can tap on, providing plentiful opportunities for the company’s long-term growth.

Disclaimer: Royston Yang owns shares of Adobe.