The Best Cloud Stocks for 2024
Did you know that cloud stocks represent one of the FASTEST growing industries in the world right now?
About one-third of a company’s IT budget now goes to cloud services and analysts predict that 94% of all workloads will be processed through cloud data centres.
Read on to discover some of the best cloud stocks to invest in this year! ▼▼▼
Table of Contents
What are Cloud Stocks?
Cloud stocks refer to companies that operate in the world of cloud computing. Cloud technology itself refers to the way data is stored and managed. A more technical definition of the cloud are servers that host and store data for users in a physical location, thereby increasing security and reliability. No longer do users need to store the data themselves on a USB stick, they can upload their data to a cloud’s servers where they will store it for you.
The companies that operate in the cloud computing space either operate the data servers, own the data servers or provide services for users using the data servers. There are three different types of clouds that companies provide with the only difference being who owns the infrastructure.
▶️ Private: This is where the cloud is created for internal use within an organisation.
▶️ Public: This is where the cloud is used to deliver services over the internet.
▶️ Hybrid: This is a combination of the two above.
There are also three main types of services provided by different cloud companies.
▶️ Software as a Service (SaaS). These are applications that are accessed by clients via mobile apps or web browser. Examples include Google Drive, Google Play, etc.
▶️ Platform as a Service (Paas). This is a place where apps are developed and tested by developers.
▶️ Infrastructure as a Service (IaaS). This is a virtual environment for computing resources.
With more than $330 billion spent on cloud infrastructure in 2020, the companies offering cloud services are high on investors’ watchlists. The coronavirus pandemic forced many companies to think differently and adopt different business models.
With more and more companies moving online and into the digital arena, the cloud computing sector is forecasted to explode. This is likely to create huge demand in some of the top cloud stocks.
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Big 3 Cloud Computing Stocks You Need to Know!
There are many different companies that are likely to benefit from the growth in the cloud computing sector. We explore some of the best cloud computing stocks in the next section. However, there are three big cloud stocks that every investor needs to know about.
Amazon, Microsoft and Alphabet account for more than 57% of the global cloud computing market! These are the three biggest players in the marketplace, with Alibaba Cloud and IBM Cloud trying to catch up.
However, the cloud sector is vast with other companies such as Intel, NVIDIA, Salesforce.com, Oracle, Netflix and many others playing a big part.
All of these companies involved in cloud computing can be split up into three different types of cloud stocks. These include:
▶️ Cloud Providers. Companies such as Amazon, Microsoft and Alphabet own the biggest data centres in the world and handle most of the data across the internet. In fact, Amazon’s AWS Cloud controls a third of the entire market!
▶️ Cloud Maintainers. To manage and maintain the cloud, cloud providers need software and hardware to do so. Companies such as Intel and NVIDIA provide chips that are used to build the servers to store the data uploaded to a cloud provider's infrastructure. Network providers such as Cisco Systems provide hardware that helps keep the cloud running at a fast pace.
▶️ Cloud Users. The majority of companies use the cloud to provide services to their users. Most people will be familiar with cloud users such as Netflix. All of the company’s TV shows and movies are stored on the Amazon AWS cloud which makes it easily accessible to Netflix’s users.
There are many more companies that are becoming cloud users every single day. This growth is likely to help cloud stocks that are cloud providers and cloud maintainers the most. Keeping up to date with the share price of these cloud stocks can be key to finding high-quality investment opportunities.
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The 3 Best Cloud Stocks for This Year!
As discussed in the previous section, there are many different cloud stocks that are likely to benefit from the forecasted growth for the industry whether it is a cloud provider, cloud maintainer or cloud user. But, within these three types of cloud computing stocks, it always comes back to the three main players.
Below, we discuss the historical share price activity for the three big players to try and identify the potential opportunities and risks that lie ahead. Let’s get started!
#1. Amazon (AMZN)
Amazon’s AWS (Amazon Web Service) cloud service only makes up around 12% of the company’s sales. However, while this may be small it is one of Amazon’s highest profit margin divisions accounting for more than 57% of Amazon’s quarterly operating income. And, surprisingly, many analysts believe there is still much more room for growth.
In 2020, Amazon’s AWS raked in an incredible $13.5 billion profit which accounted for more than 63% of the company’s entire operating profit for the year! In the same year, Amazon announced a range of newly signed contracts with some very large companies from the digital payment processing, medical and sports sectors.
Of course, this is just one part of the business that is booming. It just so happens that the rest of Amazon’s business is also booming! The company’s e-commerce business was already well-positioned before the coronavirus pandemic but has done even better since.
#2. Microsoft (MSFT)
Microsoft’s Azure cloud service comes in second place in the global cloud market with a 16.8% share and growing. Of all the early-stage cloud users, Azure is chosen by around 41% of companies, second to AWS. However, Microsoft’s Azure cloud service makes it one of the fast-growing cloud computing stocks.
While it has a long way to compete against AWS, many analysts are bullish on Microsoft stock than ever before because of the growth in its cloud computing division. Research shows that they are also starting to gain a larger market share from the competition.
In Microsoft’s first earnings report of 2021, the company posted 50% year-over-year growth in the Azure cloud business. This compares to just 28% growth in Amazon Web Services. Analysts are bullish about Microsoft’s prospects because they already have a strong user base with Office 365, making the transition to the cloud seamless.
#3. Alphabet (GOOG)
Google’s cloud service comes in third place in the global cloud market with an 8.5% share. While much smaller than its rivals, Google Cloud has one of the strongest year-on-year growth metrics. In 2018, the revenue from Google Cloud was $5.8 billion. In 2020, the total revenue from Google Cloud was $13.1 billion.
Interestingly for investors, Google is still investing a lot of money to grow its cloud business as it is still relatively small and has huge growth potential. This led to the company announcing an operating loss for 2020. However, the investment is likely to help the company grow even more profitably in the future.
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Cloud Computing Stocks - The Best of the Rest!
As the cloud computing sector grows, the big three cloud stocks discussed above are likely to benefit the most. However, there is a range of other cloud computing stocks that will also benefit from this growth. We discuss a few below.
#1. DataDog (DDOG)
DataDog monitors the performance of different applications. The company provides a unique cloud offering as it is cloud-native which means it works with applications that use Amazon Web Services, Microsoft Azure and Google Cloud.
The company only went public in 2019 but its share price has risen more than 100% higher. In its latest earnings report, DataDog reported an 87% year-on-year growth with higher customer spending and more third-party integrations.
#2. Alibaba (BABA)
Alibaba has a big portfolio of businesses - similar to Amazon. One growing business is Alibaba’s Cloud (AC) division which provides cloud computing services to digital and online businesses. The division’s most recent development has been a hybrid cloud offering which they say will help them target SMEs (small to medium enterprises) who want to scale up.
In its latest earnings report, the company reported a 60% year-on-year increase in revenue, highlighting the growth this sector could bring to the bottom line. However, the recent Chinese government crackdown on technology companies has overshadowed any of its core business practices but could be one to watch once the political situation becomes clearer.
Other notable mentions in the best of the rest top cloud stocks include:
▶️ IBM Cloud - A division of IBM providing cloud computing services to businesses, including storage, networking, developer solutions, security management and more.
▶️ Salesforce.com - A cloud-based customer relationship management (CRM) platform to help companies acquire and retain more customers.
▶️ Crowdstrike - A cloud-based cybersecurity platform that leverages artificial intelligence to catch cyber attacks.
▶️ Cloudflare - A cloud-based services company providing website security and infrastructure services.
▶️ Docusign - A cloud-based company that provides the ability to sign financial documents electronically, removing the need for paper contracts.
How to Invest in Cloud Stocks
To start investing in your chosen cloud stock, you can follow the steps below.
- Open your MetaTrader 5 trading platform provided by Admiral Markets. Alternatively, start your free download here.
- Open the Market Watch window by selecting the View option from the top menu.
- From the Market Watch window, right-click and select Symbols. Here you can search from the +3,000 instruments available to trade on via Admiral Markets. Start typing the name of your cloud stock and a selection of instruments will appear.
- Select your relevant instrument and press OK to add the symbol to your Market Watch list. To view a live chart of the symbol’s price, drag the text of the symbol from the Market Watch window onto the chart.
- To open a trading ticket, right-click on the chart and select Trading and then New Order. A trading ticket will open up for you to input your own entry, stop loss and take profit levels as well as your position size.
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FAQs on Cloud Stocks
What are the best cloud based stocks?
The top three biggest cloud based stocks are Amazon, Microsoft and Alphabet. Other cloud based stocks include IBM, DataDog, Salesforce, Alibaba and CrowdStrike.
Can you invest in the cloud?
Yes you can invest in the cloud. Nearly all companies use the cloud. Investors tend to focus on companies that provide cloud solutions to other businesses. These companies include Amazon's AWS Cloud and Microsoft's Azure Cloud.
About Admiral Markets
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or recommendation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
