Investing $3,000 in These 3 Cloud Computing Stocks Makes Sense
A lot of cloud-based platform providers are sky-high these days, but these three stocks have what it takes to keep reaching for the clouds.
One of the better performing sectors since the growth stocks bottomed out in mid-March is cloud computing. If you want a little more tech stock exposure in your portfolio, putting some new money to work in the next wave of market darlings could be a smart call.
If you have $3,000 to invest, taking positions in CrowdStrike (NASDAQ:CRWD), Datadog (NASDAQ:DDOG), and MongoDB (NASDAQ:MDB) makes sense right now. Let’s go over what the these three cloud computing stocks are doing right these days.
A 100-dollar bill as a paper airplane against a backdrop of clouds.
Security is everything in the tech world, and CrowdStrike is there offering cloud-native endpoint protection. CrowdStrike’s Falcon platform is a breach-thwarting suite of protection modules that use big data and AI to provide visibility and protection in tackling the entire threat lifecycle.
CrowdStrike’s growth is impressive. Revenue rose 93% in its fiscal 2020 year, which ended in January, with revenue up 89% in its most recent quarter. Subscription revenue — the main way CrowdStrike makes money through its platform at more than 90% of its top-line results — grew 90% in its latest quarter.
Companies keep flocking to CrowdStrike. It had 5,431 subscription customers at the end of January, more than doubling over the past year. It added 870 net new subscription accounts in just its latest quarter. With annual recurring revenue clocking in 92% higher than it was a year earlier, gross margin improving, net losses finally starting to shrink, and CrowdStrike turning free cash flow positive last year, what isn’t there to like?
CrowdStrike tackles a growing number of endpoint protection issues, so it’s not a surprise that once clients get their foot in the door, they quickly engage with the entire ecosystem. The number of subscribers leaning on at least five of the Falcon modules has risen by 33% over the past year.
Obviously, CrowdStrike won’t be growing at a 90% clip forever. Its own guidance back in mid-March was calling for 50% to 52% growth this new fiscal year. It could update that when it reports early next month, but it’s comforting to know that CrowdStrike outlooks have historically proved conservative.
Even cloud computing companies can’t escape the threat of the new coronavirus-inspired normal, but it’s easy to see CrowdStrike holding up better than other enterprise solution providers. Companies will be scaling back on expenses, but you don’t skimp on cybersecurity. With more people working from home, the addressable market for CrowdStrike is probably expanding instead of contracting. The adoption of cloud-based platforms is likely accelerating during this shelter-in-place phase of the pandemic.
You can never have too much information, and that’s where Datadog, a fast-growing provider of cloud monitoring and analytics tools, comes in. It was one of last week’s biggest winners, soaring to new all-time highs after posting blowout financial results.
Revenue is accelerating, soaring 87% in its latest quarter. This is the third time in a row that Datadog has surprised analysts by posting a small quarterly profit when a loss was expected. I guess you can’t teach the old Wall Street dogs new Datadog tricks.
Companies seeking silo-busting insight are hungry for actionable information, and they have no problem trusting Datadog with more and more of their money. The number of customers generating annual recurring revenue greater than $100,000 has soared from 508 a year earlier to 960 today.
In this topsy-turvy earnings season where most companies are either suspending their outlooks or slashing their full-year targets, Datadog is actually jacking up its guidance. Management is lifting its full-year revenue forecast to a range of $555 million to $565 million, up $20 million on both ends of that range.
Another hot computing stock that just happened to hit another all-time high on Friday was MongoDB, the provider of an open source database built for the cloud. Revenue rose 58% in its fiscal year ending in January, slowing to 44% in its latest quarter. Atlas — its cloud-based platform, which has grown from 32% to 41% of the revenue mix over the past year — saw its revenue soar 80% in its latest quarter.
MongoDB’s database has been downloaded more than 90 million times, tripling its tally from just two years ago. MongoDB has a free online university to get developers up to speed, and there have been more than a million registrations for that learning platform.
Of the three cloud computing darlings on this investing hit list, MongoDB might be the one that’s the most vulnerable to the COVID-19 disruption. The $510 to $530 million it was targeting in revenue for all of fiscal 2021 in mid-March did include a $15 million to $25 million reduction as a result of the pandemic. We’ll see how that forecast gets updated when MongoDB reports early next month, but for now it’s fair to say that investors are as excited about the stock as developers are about the database platform that’s easy to scale and built for the future.