Since the onset of the COVID-19 pandemic, the cloud market has grown significantly due to an increased demand for cloud technology amid the remote work environment. Digital transformation through cloud migration, AI, automation, and other advanced technologies have changed the way organizations operate, boosting the cloud market’s growth. SaaS solutions are the biggest drivers of cloud computing growth.
According to Gartner, more than 1.3 trillion (57.7%) of enterprise IT spending is expected to be directed toward the cloud in 2022, and almost $1.8 trillion (65.9%) of spending by 2025. Given these factors, we believe cloud stocks Mimecast Limited (MIME) and Progress Software Corporation (PRGS) could be solid bets now.
However, immense competition and semiconductor and labor shortages might affect the cloud market adversely. So, we think the fundamentally weak stocks of Snowflake Inc. (SNOW) and Five9, Inc. (FIVN) must be sold.
Stocks to Buy:
Mimecast Limited (MIME)
MIME offers cloud security and risk management services for email and corporate information. The London-based company provides email security solutions, cyber resilience extensions, web security service, business continuity and sync and recovery services, and mobile and desktop apps. It sells its services through direct sales and channel partners.
Last week, MIME introduced a new integrated solution with SentinelOne, an autonomous cyber security platform company, to improve end-to-end threat protection and accelerate incident response across security layers, including email, endpoints, and cloud. This new integration is expected to provide comprehensive protection to customers and improve the company’s value and profitability.
In the fiscal 2022 third quarter, ended Dec. 31, 2021, MIME’s revenue increased 16.9% year-over-year to $151.60 million. MIME’s gross margin increased 19.2% year-over-year to $119.66 million. The company’s adjusted EBITDA grew 32.6% year-over-year to $45.88 million. MIME’s net income grew 32.4% year-over-year to $26.66 million. MIME’s net income per ordinary share rose 22.6% year-over-year to $0.38.
A $154.09 million consensus revenue estimate for its fiscal fourth-quarter, ending March 31, 2022, represents 15.1% year-over-year growth from the same period last year. The $0.32 consensus EPS estimate for the current quarter indicates 13.5% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of MIME have advanced marginally year-to-date and 79.4% over the past year, respectively. It closed yesterday’s trading session at $79.82.
MIME’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Growth, and Quality. It is ranked #4 of 28 stocks in the Software -Security industry. Click here to see MIME Ratings for Value, Momentum, Sentiment, and Stability.
Click here to checkout our Cybersecurity Industry Report for 2022
Progress Software Corporation (PRGS)
Bedford, Mass.-based PRGS provides software products to develop, deploy, and manage business applications. The company offers products in various categories, including DevOps, digital experience, infrastructure monitoring, secure file transfer, UI/UX tools, connectivity and integration, mission-critical app platform, and intelligent decisioning.
On Jan. 27, 2022, PRGS established an amended secured credit facility to raise $575 million–including a $275 million senior secured term loan and a $300 million line of credit–and to lower costs, with the flexibility to expand by an additional $260 million or greater. The improved credit facility might help PRGS execute its growth strategy over the near and longer term.
PRGS’ revenue increased 11.4% year-over-year to $143.73 million in its fiscal fourth quarter, ended Nov. 30, 2021. PRGS’ income from operations grew 7.4% year-over-year to $51.63 million. Its net income improved marginally year-over-year to $41.29 million. And the company’s earnings per share increased 1.1% from its year-ago value to $0.92.
Analysts expect PRGS’s revenue for its fiscal year 2022, ending November 2022 to come in at $607.19 million, representing a 9% rise year-over-year. The Street expects the company’s EPS for its fiscal 2022 to come in at $4.01, representing a 3.7% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 6.6% in price to close yesterday’s trading session at $45.93.
PRGS has an overall B rating, which translates to Buy in our POWR Ratings system. PRGS has a grade of B for Value, and Growth. Within the Software - Application industry, it is ranked #14 of 165 stocks.
To see additional component grades of POWR Ratings (Growth, Momentum, Stability, and Sentiment) for PRGS, click here.
Stocks to Sell:
Snowflake Inc. (SNOW)
SNOW is a San Mateo, Calif.-based provider of a cloud-based data platform in the U.S. and internationally. The company’s platform provides Data Cloud that enables customers to consolidate data into a single source to drive business insights, share data and build a data-driven application. The platform is used by various organizations in a wide range of industries.
For its fiscal 2022 third quarter, ended Oct. 31, 2021, SNOW’s cost of revenue increased 81.1% year-over-year to $120.79 million. Its total operating expenses increased 41.4% year-over-year to $370.93 million. And the company’s net loss and net loss per share attributable to common stockholders amounted to $154.86 million and $0.51, respectively.
Analysts expect SNOW’s EPS for its fiscal year 2022 ending January 2022 to come in at a negative $0.08, representing a 94.9% rise year-over-year. However, SNOW has missed consensus EPS estimates in each of the trailing four quarters.
The stock has declined 9.1% in price year-to-date and 2% over the past year, and closed yesterday’s trading session at $307.94.
This bleak outlook is reflected in SNOW’s POWR Ratings. SNOW has an overall D rating, which translates to Sell in our POWR Ratings system. It has an F grade for Value and a D for Momentum, Stability, and Quality. It is ranked #70 out of 81 stocks in the D-rated Technology - Services industry.
In addition to the POWR Ratings we have stated above, one can see SNOW ratings for Growth and Sentiment here.
Five9, Inc. (FIVN)
FIVN is a provider of cloud software for contact centers in the U.S. and internationally. The San Ramon, Calif., company offers a purpose-built Virtual Contact Center (VCC) cloud platform that delivers a suite of applications, enabling contact center-related customer service, sales, and marketing functions. It serves customers in various industries, including banking and financial services, business process outsourcing, healthcare, and technology.
Last week, FIVN announced a multi-year partnership with professional golfer and three-time PGA Tour winner Max Homa to represent the brand during Five9 events and make special appearances to help the company build brand awareness and customer relationships. FIVN is expected to take some time to realize gains from this brand ambassador partnership with Max as the professional golf events are held in the future.
FIVN’s cost of revenue increased 44.2% year-over-year to $67.14 million in its fiscal third quarter ended Sept. 30, 2021. However, the company’s cash and cash equivalents declined 62.6% over the nine months ended Sept. 30, 2021, to $82.47 million.
The Street expects FIVN’s EPS to decrease 5% year-over-year to $0.22 in the current fiscal first quarter, ending March 31, 2022.
The stock has declined 3.3% in price year-to-date and 25% over the past year. FIVN closed yesterday’s trading session at $132.83.
FIVN has an overall D rating, which translates to Sell in our POWR Ratings system. It is no surprise that FIVN has a D grade for Quality, Stability, Value, and Momentum. Within the F-rated Software - Application industry, it is ranked #140 of 165 stocks. To see additional POWR Ratings (Sentiment and Growth) for FIVN, click here.
Click here to check out our Software Industry Report for 2022
SNOW shares were trading at $318.47 per share on Thursday morning, up $10.53 (+3.42%). Year-to-date, SNOW has declined -5.99%, versus a -4.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.2 Cloud Stocks to Buy, 2 to Sell in February appeared first on StockNews.com