10 Worst Cloud Stocks To Buy According to Short Sellers

1. Rubrik Inc. (NYSE:RBRK)

Short % of float: 10.46%

Number of Hedge Fund Holders: 28

Rubrik Inc. (NYSE:RBRK) is a cloud data management and security company specializing in data backup, recovery, and protection. Known for its scalability and efficiency, Rubrik effectively meets the demands of modern IT environments.

Despite being heavily shorted, Rubrik Inc. (NYSE:RBRK) recently delivered strong financial results, with Subscription Annual Recurring Revenue reaching $919 million, a 40% year-over-year increase. Cloud ARR also experienced substantial growth, surging 80% year-over-year to $678 million. Rubrik’s Cloud ARR and revenue exceeded expectations by 5%, and its contribution margin outperformed by 500 basis points.

The company’s success was further enhanced by its support for hundreds of customers during the CrowdStrike outage, which contributed to increased pipeline growth. In addition, Rubrik’s net retention rate exceeds 120%, demonstrating that customers are consistently increasing their spending with the company.

On September 10, Guggenheim reiterated a Buy rating on RBRK with a price target of $48. The firm highlighted Rubrik’s impressive growth, noting it as the fastest-growing company within their enterprise software coverage. Guggenheim emphasized that Rubrik’s sales and marketing expenses are well-aligned with new ARR and recommended continued investment to capture the vast market opportunity. The firm also believes Rubrik Inc. (NYSE:RBRK) is on track to achieve free cash flow margins exceeding 35%, comparable to typical software companies at scale.

As of Q2 2024, 28 hedge funds held positions in Rubrik Inc. (NYSE:RBRK), with a combined stake valued at $165.35 million.

While we recognize the potential of RBRK as an investment, we believe certain deeply undervalued AI stocks offer greater prospects for higher returns in a shorter period. If you’re seeking an AI stock with even more promise than those on our list and trading at less than 5 times its earnings,  check out our report about the cheapest AI stock.

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