The Future is in the Cloud

Believe it or not, cloud computing is not the latest comfy place to sit with your laptop.

These hot buzzwords in tech are all about virtual servers that can be accessed anywhere in the world over the Internet. Cloud computing can be dated all the way back to 1950 when mainframes were purchased by institutions to act as a server that could be accessed by individuals within the company. Today, more and more companies are taking advantage of cloud computing opportunities including e-commerce websites such as Amazon (AMZN) and Internet giants like Google (GOOGL). With low costs and global accessibility, it is believed that cloud computing will continue to grow exponentially. Based on the latest research, it is expected that between the next five and 10 years, more than half of information technology will end up in the cloud.

As of today, there are several major companies paving the way in cloud computing. According to CNBC, Rackspace (RAX), VMWare (VWM), and Salesforce (CRM) are just several of the companies taking strides in cloud technological advancements. Financial experts are recognizing these companies as leaders in the space and they are urging investors to get in on a piece of the action.

Rackspace, an IT hosting company, partnered with NASA in 2010 to create OpenStack. The project standardizes the way virtual clouds are run and it has been wildly successful working with 388 companies.

Raymond James analyst Frank Louthan maintained his BUY Rackspace rating on May 13 saying, “the business has more growth and the high end of the guidance is achievable but the CEO transition and competitor price cuts are likely to remain an overhang for the stock.” Despite the transition in management, Louthan added, “OpenStack does appear to be gaining momentum with larger enterprises…While we understand that does not necessarily equal business for Rackspace, we do believe increasing OpenStack adoption should be beneficial in the long run to its founder and still one of its largest contributors.” Louthan has a +24.5% average return on the stock and the 5-star analyst consensus on the stock is Strong BUY.

 

 

VMware, a software company that provides cloud services, claims that over 500,000 organizations worldwide currently use VMware technology. This technology has been hailed as a “breakthrough” in the cloud market for letting customers easily move between public and private clouds.

The company received a strong BUY recommendation from ISI Group analyst Brian Marshall on May 5. Marshall spoke with an executive from the company about freely available OpenStack software, noting that the company is, “helping customers by adding the necessary management and other capabilities on top of the basic OpenStack software packages.” Marshall also sees room for more opportunities, arguing, “There is huge interest around a standard API layer for cloud development not tied [to] a particular vendor but general purpose cloud infrastructure is a challenging proposition. VMW aims to assist in this transition.” Marshall has earned a +28.7% average on the stock and the 5-star analyst consensus on the stock is Moderate BUY.

 

Fellow cloud software company, Salesforce, has expanded its products over the years to include analytics, marketing, and social networking tools to supply its over 100,000 customers.

The company also received a BUY rating from Canaccord Genuity analyst Richard Davis following strong Q1 results this month. Davis noted, “We would build or expand positions in CRM shares because we believe this firm has the highest quality franchise among cloud software firms.” Davis has earned a +4.2% average return on the stock and the 5-star analyst consensus is Strong BUY.

Cloud computing may not be brand new, but it is certainly taking off in a big way. Financial experts are acknowledging the market potential of cloud computing and welcome interested parties to be part of the latest market buzz. Will you take advantage of these stocks now to see if they reach the clouds tomorrow? 

 

Uri Gruenbaum is the CEO of TipRanks