Cloud computing is among the most important technologies right now, and it will keep being so for years to come. The latest numbers show that cloud computing market will grow from $270 billion last year to reach $397 billion by around 2022.
How can you best profit from cloud computing’s growth? By investing in great companies that are leaders in this sector. To help you do this, we asked two top investors for their current cloud favorite ideas and they responded with Snowflake and Atlassian.
When Snowflake had its IPO around eight months ago, it took everyone by surprise. The stock was around the priced in range of $75 to $85 a share and was eventually boosted to $120 as demand surged. Shares soared and did not look back, opening at $245 and ending at $255, higher by 113% on its first day of trading, making it the largest software IPO ever.
While excitement might have faded, its future is just as bright as it ever was. Savvy investors can now buy shares under the IPO price for a great cloud stock that is just getting started.
Snowflake gives its customers a cloud-based warehouse that allows them to store, access, and easily share their data. It breaks down into data silos, taking in both semi-structured and structured data, helping its customers extract more useful information. Perhaps even better, the offering is cloud-agnostic, meaning its services work with many cloud platforms, like Amazon’s AWS and Microsoft Azure, among others.
For its 2022 fiscal Q1 (which ended on April 30, 2021), Snowflake’s revenue of $214 million went up by 110% y/y, keeping the triple-digit growth it produced last year. Even better is the firm’s forecast for 2021, as Snowflake is looking at fiscal 2022 revenue growth of over 85% at the midpoint of its predictions. While the firm is losing money, it expects adjusted free cash flow to reach breakeven this fiscal year, which should do away with anxiety about its lack of profits.
Snowflake’s customer counts are also impressive. Total customers of 4,532 grew by 67% y/y, while those paying $1 million or more over the trailing-12-month time frame increased by 117%. Not only is the firm bringing in new higher-paying clients, but existing users are spending more too, as evidenced by the Snowflake’s net revenue retention of 168%.
Atlassian’s goal is to “unleash the power of teams.” Combined with its drive to be a cloud-first organization, it is becoming an unstoppable company. Their recent customer growth and revenue numbers are evidence this software is giving incredible value for its subscribers. Even as it attracts a large customer base, it is growing even faster. This means once customers jump in, they realize the value of Atlassian’s toolset and then expand their spending.
The company is transitioning customers off its on-premise platform to a cloud-first platform. This change is allowing the research team to invest more in its product. It has released what it labels its Point A tools, a collection of applications being influenced by the companies who are using them. With early feedback, these tools are getting the most requested features to allow customers to get these changes in record time.
Next year might be a little difficult for Atlassian as its subscribers switch over to its cloud products, but it will come out the other side stronger than before. Investors should invest in some shares of this incredible cloud company today.
Author: Steven Sinclaire