Edge computing empowers the processing and storage of data near the source. Hence, it offers faster real-time processing and low latency and high efficiency.
The primary trends that will fuel this transition are AI at the edge, 5G networks and edge as a service. This change is important for tasks that need real-time processing like self-driving cars, smart cities and internet of things devices. Also, improvements in security measures and edge analytics are improving the stability of edge computing more and more.
However, not all edge computing stocks are created equal. So here are three companies that I think are best positioned to take advantage of these shifts in data processing for years to come.
Fastly (FSLY)
Fastly (NYSE:FSLY) can be considered as one of the leaders in the development of edge computing. The company has one of the best content delivery networks (CDN) for minimizing latency and improving internet speeds, which is essential for edge computing applications dealing with real-time data.
Fastly benefits from having a pay-as-you-go pricing model as one of its major advantages. This flexibility opens up the revenue growth opportunities for companies that range from single-man startups to large corporations. Furthermore, the company’s capacity to acquire new customers, especially the latest 18 enterprise clients, confirms its competitive advantage and ability to cater to both ends of the market.
To underline the bull case for FSLY as one of those edge computing stocks, it trades at just 1.86x sales, which is very cheap me considering its top-line has grown in the low double-digits from 2019, with an acceleration on the horizon as predicted by analysts.
Akamai Technologies (AKAM)
Akamai (NASDAQ:AKAM) is a provider of content delivery network (CDN) services. I like AKAM stock for a number of reasons, but mostly centered around its recent financial results. The Compute segment, in particular, saw an impressive growth in the first quarter of 2024. Based on analyst projections the best has yet to come for the company, as it has an implied upside of around 25% at the time of writing.
AKAM is an edge computing stock that investors can enhance data processing via the strategic shifts it has made. Unlike FSLY, AKAM has pivoted towards lower velocity deal sizes that have higher earnings potential. Most notably in the areas of API endpoint protection, with its acquisition of NoName Security.
With APIs being the main conduit for the transference of large amounts of data between businesses, AKAM will benefit from the rise of edge computing as it provides a vital piece of infrastructure.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) will enhance data processing capabilities at the edge. The company is a swiss army knife of strategic investments into edge computing. It’s acquired Splunk, and partnered with AI startups like Cohere. Splunk’s tech stack gives CSCO a significant leg up on its competitors. Its proprietary machine learning code sifts through large amounts of data, finding insights humans would miss.
The counter argument is that CSCO has underperformed many of its peers, being down 11.42% year to date. However, CSCO also trades at undervalued levels, at just 15x earnings and 3x sales. Granted, projected revenue and earnings growth isn’t high either. However, EPS is expected to grow in the high single digits, which would be accretive given that its downside has already been priced in.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Matthew started writing coverage of the financial markets during the crypto boom of 2017 and was also a team member of several fintech startups. He then started writing about Australian and U.S. equities for various publications. His work has appeared in MarketBeat, FXStreet, Cryptoslate, Seeking Alpha, and the New Scientist magazine, among others.