The cloud storage market is expanding, bolstered by the growing adoption of remote working models and advancing technologies that generate high-capacity data. With cloud strategies gaining traction across businesses worldwide, we think the shares of fundamentally sound cloud storage stocks Akamai (AKAM), Dropbox (DBX), and Rackspace (RKT) could soar higher in price in the near term. Read on.
Cloud storage solutions enable users to store data on the internet through a cloud computing provider that manages and operates data storage as a service. The cloud-based solutions market is expanding rapidly with the increasing demand for automation and the need to improve the storing and sharing of data. The global cloud storage market is projected to grow at a 26.2% CAGR to $390.33 billion in 2028.
Organizations shifting towards distributed work environments, and the popularity of hybrid work models, should drive market growth for the foreseeable future, given the increasing demand for low-cost data backup, storage, and protection. Furthermore, remote sensing technologies, the Internet of Things (IoT), advanced video systems, and the rising adoption of artificial intelligence, generate high-capacity data, leading to the increased demand for cloud storage services.
So, given the industry’s solid growth prospects, we think fundamentally sound cloud storage stocks Akamai Technologies, Inc. (AKAM), Dropbox, Inc. (DBX), and Rackspace Technology, Inc. (RXT) could soar higher in the near term.
Akamai Technologies, Inc. (AKAM)
AKAM in Cambridge, Mass., provides cloud services to secure, deliver, and optimize content and business applications over the internet in the United States and internationally. The company offers solutions to keep the infrastructure, websites, applications, interfaces, and users safe from online threats and cyberattacks and to improve performance. Its solutions include the Security Technology Group and the Edge Technology Group.
On March 21, 2022, AKAM announced the completion of its acquisition of Linode, one of the most trusted and easy infrastructure-as-a-service (IaaS) platform providers. The company aims to leverage Linode’s cloud computing capabilities to create a unique cloud platform to build, run and secure applications from the cloud to the edge. Thus, this acquisition might prove strategic for AKAM.
AKAM’s revenue increased 7% year-over-year to $905.36 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its income from operations grew 45.7% from its year-ago value to $196.09 million, while its net income improved 41.6% year-over-year to $160.53 million. Its EPS increased 42.6% from its year-ago value to $0.97.
Analysts expect AKAM’s revenue for the first quarter, ending March 31, 2022, to be $905.03 million, indicating 7.4% year-over-year growth. The company’s EPS is expected to increase 3% year-over-year to $1.42 for the same quarter. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
AKAM stock has gained 19.7% in price over the past year and 15.8% over the past six months to close the last trading session at $$121.11.
AKAM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AKAM is also rated B in Growth, Value, and Quality. It is ranked #7 of 60 stocks in the Software – Business industry.
To see additional POWR Ratings for Momentum, Stability, and Sentiment for AKAM, click here.
Dropbox, Inc. (DBX)
San Francisco-based DBX provides a content collaboration platform that allows individuals, teams, and organizations to sign up and collaborate through its website or app. The company serves customers in the professional, technology, media, education, industrial, retail, and financial services industries, with approximately 700 million registered users as of December 2021.
DBX’s revenue increased 12.2% year-over-year to $565.50 million in its fiscal fourth quarter, ended Dec. 31, 2021. Its paying users totaled 16.79 million compared to 15.48 million for the same period last year, while the average revenue per paying user was $134.78, compared to the prior-year quarter value of $130.17. Its net income has improved 136% year-over-year to $124.60 million. And its EPS has increased 138.1% from its year-ago value to $0.32.
The $0.38 consensus EPS estimate for its fiscal first quarter, ending March 31, 2022, represents a 7.5% improvement year-over-year. The $559.03 million consensus revenue estimate for the same quarter represents a 9.3% increase from the same period last year. In addition, the company topped the Street’s EPS estimates in each of the trailing four quarters.
DBX’s stock has gained 4.4% in price over the past month to close the last trading session at $23.69.
It is no surprise that DBX has an overall rating of A, equating to Strong Buy in our POWR Ratings system.
DBX also has an A grade in Quality and a B in Growth, Value, and Sentiment. It is ranked #9 of 78 stocks in the Technology – Services industry.
In addition to the POWR Rating grades I have just highlighted, one can see the DBX ratings for Momentum and Stability here.
Rackspace Technology, Inc. (RXT)
RXT is a multi-cloud technology services company that operates through its two segments: Multicloud Services; and Apps & Cross-Platform worldwide. RXT is headquartered in San Antonio, Tex.
On March 17, 2022, RXT announced that it is working with BMG, the fourth biggest global music company, for its migration to Google Cloud. RXT will advise BMG throughout its cloud journey and help it accelerate cloud adoption by providing various resources. Also this month, RXT announced that it is working with Delta Thermal, a Tucson-based company that provides solutions to utility and mining customers for monitoring equipment temperatures to prevent failures and downtime. RXT should protect and grow the power grids enabled by Delta Thermal and help its customers predict and prevent costly electric outages. These collaborations demonstrate RXT’s solid positioning in the cloud space.
For its fiscal fourth quarter, ended Dec. 31, 2021, RXT’s revenue increased 8.5% year-over-year to $777.30 billion. Its net cash provided by operating activities for its fiscal year ended Dec. 31, 2021, grew 217.7% from its year-ago value to $370.80 million, while its cash, cash equivalents, and restricted cash balance stood at $275.40 million, reflecting a 154.8% increase year-over-year.
The Street expects RXT’s revenue for its fiscal year ending Dec.31, 2022 to improve 8.4% year-over-year to $3.26 billion. Also, the $3.56 billion revenue estimate for the year ending Dec.31, 2023 represents a 9.1% increase year-over-year. RXT also beat the consensus EPS estimates in the trailing four quarters.
RXT’s shares have gained 3% in price over the past month to close the last trading session at $11.46.
The company has an overall B rating, which translates to Buy in our proprietary ratings system.
RXT is rated A in Growth and B in Value. Among the 54 stocks in the Technology – Communication/Networking industry, it is ranked #9.
Click here to see additional POWR Ratings for Quality, Momentum, Stability, and Sentiment for RXT.
AKAM shares were trading at $121.04 per share on Thursday morning, down $0.07 (-0.06%). Year-to-date, AKAM has gained 3.42%, versus a -3.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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