Investing in Cloud Computing Stocks: Oracle, ServiceNow, and Okta in 2024
Cloud computing forms the basis of the new economy, and business processes in such a modern economy can scale up to innovate with mobility and efficiency at a very low cost. Companies that hold dependency on cloud-based solutions are going to soar further with increased demand for digital transformation within sectors, making them an investment so abundantly lucrative.
Thus, investors should track powerful cloud computing stocks that will find their spaces in the digital economy, such as Oracle Corporation (ORCL), ServiceNow, Inc. (NOW), and Okta, Inc. (OKTA).
Why Invest in Cloud Computing Stocks?
Cloud computing has transformed identity management and security by automating enterprise services across the globe. Software applications have also revolutionized business activities through innovations in storage, databases, and cybersecurity. This means that the market for software is expected to continue growing at a 5.3% CAGR from 2024 to 2028, totaling $858.10 billion.
The cloud infrastructure spending, as calculated by IDC, grows in double digits to an expected level of $213.7 billion in 2028, further driving the thought that cloud has become critical. With an increasing dependency on the cloud, the need for software security will be massive in order to ensure the systems’ protection, preservation of access control, and defending them against threats. The security software market is expected to grow by 13.9% from 2024 to 2030, covering nearly $58.6 billion.
With this rising interest in cloud computing to maintain their data effectively and thereby optimize the workflow, hope is now what the clouds seem to be about in this market. Now, let us get down to business for specifics about the basics of the above-mentioned cloud computing stocks.
Oracle Corporation (ORCL)
ORCL is a company whose solutions and services supporting enterprise information technology environments around the globe are provided. The firm delivers cloud software applications, cloud-based industry solutions, application licenses, infrastructure technologies, databases, Java, middleware, hardware products, along with consulting and customer services.
With regards to the trailing-12-month levered FCF margin, ORCL’s at 19.21% is 84.6% above the industry average at 10.41%. The stock at 30.45% for trailing-12-month EBIT margin stands 511.9% above the industry average of 4.98%. Lastly, the stock at 20.40% for trailing-12-month net income margin stands 436% above the industry average of 3.81%.
3 STOCKS TO DOUBLE THIS YEAR
For the fiscal first quarter that closed on August 31, 2024, ORCL’s revenues went up by 6.9% from the previous quarter, reaching $13.31 billion. Operating income also increased by 21.1% year over year to $3.99 billion. The firm’s net income and EPS, at $2.93 billion and $1.03, respectively, grew 21% and 19.8% from the corresponding prior-year quarter.
Street predicts ORCL to publish a 9% surge in revenue and 10.3% increase in EPS for the quarter ending November 30, 2024, at $14.10 billion and $1.48, respectively. It topped the consensus estimate of EPS in three of the last four quarters. The stock is up 53% year to date and closed yesterday’s trading session at $161.31.
ORCL’s POWR Ratings are highly promising. It received an overall B grade that translates into a Buy in our in-house rating system. POWR Ratings evaluates the stocks based on 118 different factors uniquely weighed.
It is ranked #25 out of 125 stocks in the Software – Application industry. It has an A grade for Sentiment and a B for Stability and Growth. Value, and Momentum ratings.
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ServiceNow, Inc. (NOW)
NOW provides enterprise cloud computing solutions defining, structuring, consolidating, managing, and automating the services for enterprises worldwide. The company operates the Now platform for workflow automation, artificial intelligence, machine learning, robotic process automation, process mining, performance analytics, electronic service catalogs and portals, data benchmarking, encryption, etc.
NOW announced, on 10th September 2024, that it would incorporate Agentic AI within its system to increase 24/7 productivity in IT, Customer Service, HR, and many other functions. The new AI agents will have advanced reasoning capabilities, ensuring a deep contextual understanding. Organizations can then create and deploy custom GenAI skills with the help of NOW’s Assist Skill Kit.
July 24, 2024: NOW and Boomi announce partnership to leverage AI-driven self-service solutions to deliver unmatched customer experiences. Boomi will leverage the NOW platform for better support and self-service, and ServiceNow will use the API Management capabilities of Boomi to more effectively monitor and govern APIs.
In terms of the trailing-12-month net income margin, NOW’s 11.51% is 202.5% higher than the 3.81% industry average. Its 6.29% trailing-12-month Return on Total Assets is 203.3% higher than the 2.08% industry average. And its 7.98% trailing-12-month Capex / Sales is 278.8% higher than the industry average of 2.11%.
Total revenues of NOW in the second quarter ended June 30, 2024, rose 22.5% compared with last year to $2.64 billion. Gross profit in non-GAAP measures increased 23.1% from last year’s quarters to $2.17 billion. In addition, non-GAAP net income grew by 34% over last year’s quarters to $651 million. Earnings per share on a non-GAAP basis stands at $3.13, increasing 32.1% compared with last year.
Analysts presently project NOW EPS for the quarter ending September 30, 2024 to jump 18.2% year-over-year to $3.45. Its revenue for the said quarter is expected to grow 20% year-over-year to $2.75 billion. The stock outperformed the consensus EPS estimates in each of the trailing four quarters. The stock has rallied 44.8% over the past year and closed the last trading session at $877.57.
NOW’s sentiment might be positive because the POWR Ratings reflect well on it. It is ranked #15 out of 39 stocks in the B-rated Software – Business industry. It has a B grade for Growth, Sentiment, and Quality. To see NOW’s Value, Momentum, and Stability ratings .
Okta, Inc. (OKTA)
OKTA is an identity partner doing business worldwide. The company sells a suite of products and services for the management and security of identities, which include Single Sign-On, Adaptive Multi-Factor Authentication, API Access Management, Access Gateway, and Okta Device Access.
On the trailing-12-month levered FCF margin, the firm’s 31.19% is 199.7% superior to the 10.41% industry average. On the other hand, its trailing-12-month gross profit margin of 75.82% is 53% superior to the industry average of 49.56%.
Total revenues for the second quarter that ended on July 31, 2024, came at $646 million, a growth of 16.2% year-over-year for OKTA. Non-GAAP gross profit for the company was seen at $528 million, reflecting 18.9% growth from the year-ago value. For the same quarter, non-GAAP net income for OKTA was seen at $131 million or $0.72 per share with increases of 133.9% and 132.3% over the previous year’s quarter, respectively.
OKTA is expected to come out with year-over-year revenue and EPS growth of 11.2% and 32.7% for the quarter ending October 31, 2024, at $649.65 million and $0.58, respectively. For the past four quarters, OKTA has surprised its Street EPS estimates positively. The stock has surged 3.9% in the last nine months and closed trading at $73.58 at the end of the last session.
Strong fundamentals are represented by the POWR Ratings for OKTA. It earned a grade of B for Growth. It ranks in the #9 of 23 in its specific industry for Software – Security. Click here to see the remaining POWR Ratings for OKTA at Value, Momentum, Stability, Sentiment, and Quality.
Orcl shares finished Thursday at $161.45 a share, +$4.27 (+2.72%). Year-to-date, Orcl shares are 54.66% higher, versus +18.28% for the benchmark S&P 500 index through this period.