According to a Johns Hopkins University study, the number of COVID-19 cases across the globe crossed 41 million. Many cities in the United States and Europe are witnessing another surge in cases worse than the first wave. According to experts, this may just be the beginning with things getting worse in the winter months.
This will have negative effects on economic activity. However, we’ve learned that it will positively impact tech especially as remote working would continue to be the norm. So will online shopping, digital payments, and contactless deliveries. The technology sector has been the least impacted during the COVID-19-induced market crash. The tech rally has been on the biggest forces for the market bouncing back post-March. The Technology Select Sector SPDR (XLK) has advanced 30% since the beginning of 2020 compared to the S&P 500’s 6.3% gain.
Out of the technology stocks, the ones focusing on cloud-based services will be the biggest beneficiaries. I believe the top three stocks that will maintain a strong momentum based on their existing and modified offerings are Microsoft Corporation (MSFT), Adobe, Inc. (ADBE), and Salesforce.com (CRM).
Microsoft Corporation (MSFT)
More than anything else, MSFT is now known for its Azure cloud computing services. MSFT’s Commercial Cloud, a collection of cloud products, now contributes more than one-third of the company’s total revenue.
The tech bellwether constantly focuses on innovation to stay ahead of the game. MSFT keeps expanding the hybrid capabilities of its cloud platform to enable clients to run their apps across on-premises, the edge, and multi-cloud. While Amazon’s (AMZN) AWS remains a market leader, its market share is shrinking, while that of Azure is expanding.
MSFT’s cloud services are also exploring challenging territories such as the screening and testing for the COVID-19. The Citizen Care Pod, a smart screening center for the COVID-19 set up in Canada, has been built leveraging Azure IoT and Azure Cognitive Services.
On October 20, MSFT took cloud computing to the next level by announcing Azure Space. The company will now create cloud capabilities to address the unique needs of space technology.
MSFT doesn’t report specific revenue from Azure. The company only mentions its growth rate. For the fourth quarter for fiscal 2020, Azure grew 47% as against 64% in the same period a year ago. The cloud growth has been slowing for the company owing to the size of Azure. While the cloud usage and Azure adoption increased during the pandemic, getting new customers on board in a competitive market is expected to be tough amid the crisis. MSFT mentioned that the Transactional license purchasing continued to slow, especially in small and medium businesses. The Intelligent Cloud business climbed 17% year-over-year to $13.4 billion.
Besides Cloud, Microsoft Office, specifically Teams has been a big winner amid the pandemic. On the fourth-quarter earnings call, CEO Nadella stated “69 organizations now have more than 100,000 users on Teams and over 1,800 organizations have over 10,000 users on Teams.”
Analysts expect the EPS for the first quarter of fiscal 2021 to climb 11.6% to $1.54. Meanwhile, the revenue estimate for the period is $35.7 billion, indicating an 8.1% growth.
On a year-to-date basis, MSFT surged 36.2% to close yesterday’s session at $214.8.
How does MSFT stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating
The stock is also ranked #19 out of 96 stocks in the Software – Application industry.
Adobe, Inc. (ADBE)
ADBE, the maker of hi-end designing software as well as video editor, has successfully transformed itself into a cloud-based business over the past six years. ADBE now offers a group of cloud-based products for designing, web development video editing, photography, and more. Some of its most popular media editing applications including Illustrator, Photoshop, and After Effects are available via subscription.
Besides the creative software, another growth driver for ADBE is its Adobe Experience Cloud segment. This is a holistic marketing and advertising platform that enables businesses to optimize and enhance their engagement with customers. The marketing software is…
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