Cloud computing is undoubtedly one of the most compelling trends in tech for investors to get behind. Although this innovative industry has already been around for a few years, there are still plenty of reasons to believe that companies offering cloud software and services are just getting started in terms of growth. Digital transformations have become routine, with large enterprises increasingly seeking cloud providers to improve how their businesses run. There’s also the increasing adoption of big data, artificial intelligence, machine learning, edge computing, the Internet of Things (IoT), and more to keep in mind.
The sky is the limit for companies offering these unique and efficient cloud computing products and services, which means there will be some genuinely fantastic investment opportunities in this space over the next few years. That’s why we’ve put together the following list of 3 cloud stocks with sky-high upside so that you are ready to capitalize on the industry’s growth. Let’s take a deeper look below.
1. Shopify
If you’re interested in owning a cloud software company that has become a true force in the e-commerce industry, Shopify Inc (NYSE:SHOP) is worth adding to your watch list. The Canadian company has developed a unique global commerce solution that offers the tools for starting, growing, marketing, and managing a retail business of any size. Whether it's reaching customers across multiple sales channels, effectively managing products and inventory, processing orders and payments, fulfilling and shipping orders, leveraging analytics, and much more, Shopify can do it all.
The platform has quickly become the go-to cloud software for small and medium-sized retail businesses, and there’s plenty of room for continued growth, given the prospects of the e-commerce industry as a whole. It’s worth noting that Shopify shares have taken a beating this year and are down about 47% year-to-date, which could present an intriguing buy-the-dip opportunity for long-term investors. Finally, the fact that the company reported $1.38 billion in revenue last quarter, up 41% year-over-year, and saw its gross merchandise volume hit $54.1 billion, up 31% year-over-year, tells us that its platform is firing on all cylinders.
2. Arista Networks
This is a cloud stock that is likely flying under the radar for many investors, even though it delivered considerable gains in 2021. Arista Networks (NYSE:ANET) provides software and hardware for the networking solutions sector, which includes multilayer network switches that are a crucial piece in cloud computing. The company’s customers include data centers, enterprises, service providers, campuses, government agencies, and even entertainment companies.
In Q4, Arista reported revenue of $224.5 million, up 27% year-over-year, and has been navigating supply chain issues in a very impressive manner. The company also delivered its first-ever billion-dollar cash flow year in 2021, and it’s clear that it has become a true leader in the cloud networking space. It’s also worth mentioning that the stock underwent a 4-for-1 split last year, which could attract new retail buyers going forward. This is likely the best cloud stock you haven’t heard of, and according to MarketBeat’s consensus analyst ratings, Arista is a buy at this time with over 7% of upside.
3. Palo Alto Networks
As moving into the cloud becomes more common among large enterprises, their need for security solutions that keep their and their client's information safe will increase dramatically. That’s a huge reason why Palo Alto Networks Inc (NASDAQ:PANW) is a stock with so much potential. It’s a global cybersecurity solutions vendor that safeguards medium to large enterprises, service providers, and government agencies using network, cloud, and security operations technology.
It’s hard not to be impressed that all four of the largest enterprise cloud service providers rely on Palo Alto Networks to keep their client data protected. This speaks volumes about what Palo Alto has to offer, and with the possibility of cyber-attacks growing larger each year, the company is perfectly positioned to capitalize. Palo Alto recently posted Q2 revenue up 29.5% year-over-year to $1.37 billion and boosted its full-year guidance, both additional reasons that confirm this is a best-in-breed cloud stock.