However, as the stock market faces a period of downturn, cloud computing stocks provide a prime buying opportunity for investors. With businesses increasingly dependent on digital infrastructure, cloud computing plays a crucial role in enabling remote work, data management and enhanced cybersecurity. The cloud computing market is projected to reach $1,844 billion by 2031. The market is expected to grow at a CAGR of 18.9% from 2023 to 2031.
Therefore, investing in cloud computing stocks during a market downturn can be a savvy strategic move. Hence, three cloud computing stocks appear undervalued in the current climate and may offer significant upside as the market stabilizes.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) provides cloud-based data warehousing solutions. The company has demonstrated commendable financial growth and operational resilience. In the fiscal year 2024, Snowflake reported a 38% year-over-year (YOY) increase in product revenues, reflecting robust demand for its offerings.
Moreover, Snowflake’s market strategy includes launching innovative products. Those include Snowflake Cortex, Snowpark Container Services and Unistore which will enhance its data cloud capabilities. Snowflake’s Cortex platform is anticipated to be a game-changer. It will integrate artificial intelligence (AI) and machine learning more deeply into the data analytics processes.
The company’s investment in technology and product development positions it well to capitalize on the growing demand for cloud data solutions.
SNOW’s stock is down 16% year-to-date (YTD). However, analysts remain bullish and have an average price target of $219 on SNOW. This presents a potential 40% upside in the near term.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) is a leader in the cloud computing and digital workflow industry. The company continues to make significant strides in helping enterprises automate and optimize its operations. It boasts an impressive client roster that includes 85% of the Fortune 500 companies. Also, ServiceNow’s platform is a critical tool for businesses looking to enhance efficiency and implement digital transformation strategies.
The firm’s commitment to innovation is evident in its robust intellectual property portfolio, which includes over 2,000 U.S. and international patents. Continuously enhancing its platform with AI and machine learning, ServiceNow stays ahead of the curve. That way it ensures that its solutions are both cutting-edge and highly effective.
Recently, the company posted impressive Q1 of 2024 results. NOW showed an EPS of $3.41, beating estimates by $0.28, and a revenue of $2.60 billion, a 24.19% YOY increase, exceeding forecasts by $14.17 million. During the earnings call, management highlighted expanded collaborations, notably with Microsoft, and significant customer engagements with Hitachi Energy and Equinix. Further, key industries showing strong growth include technology, media, telecom and education.
Salesforce (CRM)
Salesforce (NYSE:CRM) has become a prominent name in the enterprise software industry. The company has strategically positioned itself at the forefront of enterprise software solutions by continuously innovating and expanding its product portfolio.
At the heart of Salesforce’s offerings, Sales Cloud is a customer relationship management (CRM) system that enables businesses to manage their sales processes. Moreover, the Salesforce Customer 360 platform integrates various functionalities, enhancing customer connectivity and data management capabilities across different verticals.
CRM’s latest quarterly results further underscore its operational excellence. Salesforce exceeded consensus estimates, with revenue growth of 10.8% YOY. A key highlight from the financial updates is the expansion of its operating margin, which grew significantly from 14.1% to 19.3% YOY. This improvement reflects the company’s diligent cost management and operational efficiency.
The stock continues to do well and is up 39% over the past one year. Wall Street analysts are bullish on the stock and have an average price target of $333. This leaves room for a 24% upside in the near term.
On the date of publication, Mohammed Saqib did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mohammed Saqib is a research analyst with experience in equity research and financial modeling. He has extensively covered stocks listed in the tech sector using fundamental analysis as the cornerstone of his approach. Currently pursuing a master’s degree in finance, Saqib is dedicated to obtaining the CFA charter to augment his expertise in the field further.