In the last decade, cloud stocks have been some of the top-performers on the market. These stocks have also been especially strong during the coronavirus pandemic.
Cloud computing remains a promising sector in 2021 for investors given the massive transition of enterprise IT spending in the public cloud. It offers companies the opportunity to save costs as they do not have to manage their own infrastructure anymore.
According to market research company Gartner, global annual spending on public cloud is expected to grow from $250 billion in 2020 to $360 billion in 2022.
Here we look at three cloud computing companies that are well poised to outperform in 2021.
Datadog (DDOG) is a fast-growing software platform
The first stock on the list is Datadog (DDOG), a company that monitors enterprise cloud activity and mines it for business insights. Datadog provides a monitoring and analytics platform for developers, technology teams, and business users.
Its SaaS (software-as-a-service) platform integrates and automates multiple processes such as infrastructure monitoring, log management, and application performance monitoring that provides real-term data of the company’s technology stack.
The Datadog platform also provides network performance monitoring and products that include dashboards, advanced analytics, and collaboration tools.
In the most recent quarter, Datadog sales were up 68% year-over-year while it expects full-year revenue to increase 57% based on the company’s midpoint forecast. As the company continues to scale, Datadog is also able to improve profit margins.
In the last fiscal year, Datadog reported an operating loss of $5.4 million while the company forecast to report operating income between $28 million and $34 million in 2020. In the June quarter, the number of customers that generate annual recurring revenue of over $100,000 grew 71% year-over-year.
Its customer base grew 37% as well in Q2, while its dollar-based net retention rate stood at 130%, which means customers are spending an additional 30% on the Datadog platform compared to the prior-year period.
Datadog stock is trading at $102 and has gained 180% since it went public last September. The company has a market cap of $31 billion, indicating a forward price to sales multiple of 54x and a price to earnings multiple of 851x. The stock is trading at a lofty valuation but it’s supported by robust earnings and revenue growth.
Splunk (SPLK) stock has returned 500% since IPO
Splunk (SPLK) develops software solutions that are used by enterprises to gain real-time operational intelligence. The company offers a variety of cloud-based products and services to enterprises.
Splunk Enterprise is a data platform that includes indexing, search, reporting, analysis, monitoring, and data management capabilities. Splunk Cloud is a cloud service for machine data while Splunk Enterprise Security addresses security threats and event management use cases.
SignalFx provides real-time troubleshooting for cloud infrastructure applications and Splunk IT Service Intelligence monitors key performance indicators of critical IT services. Further, Splunk also provides the Splunk App for Amazon Web Services that collects and analyzes data from AWS data sources.
Last year, Splunk shifted towards a…
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