As an investor, you may be looking for opportunities to capitalize on market growth by investing in cloud computing stocks. With numerous players in the market, it can be challenging to identify the best stocks to add to your portfolio.
The three best cloud computing stocks to buy have demonstrated strong financial performance, and I feel that we’ve only started to tap into their potential. By focusing on top performers, you can position your portfolio to benefit from the continued expansion of cloud-based services.
I also believe that some of these companies can be snatched up at a great discount, as they trade below their long-term intrinsic values. Now could then be a great time to hop on board these names for serious capital appreciation.
So here are three of the best cloud computing stocks to buy in June this year.
Adobe (ADBE)
Adobe (NASDAQ:ADBE) successfully transitioned its software offerings to a cloud-based subscription model and has a strong presence in the creative and digital marketing industries.
However, despite beating Wall Street’s targets for the quarter ended March 1, Adobe predicted adjusted Q2 earnings of $4.38 per share, in line with estimates, and sales of $5.28 billion, slightly below the expected $5.31 billion for its fiscal second quarter. The company’s forecast suggests a deceleration in both earnings and sales growth, marking the third consecutive quarter of slowing earnings growth and the second straight quarter of slowing sales.
This means that ADBE is trading at a historically low valuation relative to its earnings. Furthermore, the general consensus is that Adobe’s generative AI products, such as Firefly and AI Assistant, are only beginning to be monetized, and the company should benefit from new products and generative AI growth starting in the second half of the year.
ADBE still has a stranglehold in the software industry for photo and video editing, and although it had a late start to the AI market, I believe that its results in the coming quarters will surprise analysts.
Twilio (TWLO)
Twilio (NYSE:TWLO) provides cloud-based communication APIs that allow developers to integrate messaging, voice, and video capabilities into their applications.
I like TWLO because it is gaining traction on its path to profitability, with operating losses decreasing and non-GAAP operating income rising. The company’s AI features, such as CustomerAI, are gaining traction with customers, with over 150 customers already adding the service. Additionally, Twilio recently inked its largest messaging deal in company history with a leading cloud communications company.
Although the company is currently unprofitable, that could be changing soon, and investors can snap the company up at a bargain. Illustrating this is that TWLO’s price-to-sales ratio stands at a measly 2.4 times sales.
Also, due to its market cap of just around $9.4 billion, there has been some speculation that it could become an acquisition target by a major player in the FAANG acronym, with its sizable intellectual property and recurring revenue streams being good selling points to support this thesis.
Workday (WDAY)
Workday (NASDAQ:WDAY) offers cloud-based human capital management and financial management software for enterprises.
Like the other cloud computing stocks to buy on this list, WDAY represents a mixed bag of positive and negative points, drawn together by a contrarian thesis overall.
WDAY reported first-quarter earnings that topped analyst consensus estimates. Adjusted earnings per share were $1.74, up 33% from the previous year, and revenue was $1.99 billion, up 18% year over year.
However, the company’s guidance for the current July quarter and fiscal year 2025 came in below expectations. At the midpoint of guidance, subscription revenue was projected at $1.895 billion, compared to estimates of $1.93 billion.
The bull case for WDAY rests on whether one believes that the company’s on‑demand financial management and human capital management software will stand the test of time. I believe that it will, and the consensus from analysts also looks positive, with a clear path towards EPS profitability.
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.
