11 Best Cloud Stocks to Buy According to Analysts

5. Workiva Inc. (NYSE:WK)

Number of Hedge Fund Investors  in Q1 2024: 22

Analyst Average Share Price Target: $103

Upside: 39%

Workiva Inc. (NYSE:WK) is a specialized cloud company that enables businesses to access and consolidate SEC reports with other data points to allow investors and finance professionals to evaluate companies according to ESG standards. Roughly 70% of its revenue comes from these products, which provides Workiva Inc. (NYSE:WK) a dominant role in the market. At the same time, this dependence on a single sub cloud industry also leaves it vulnerable to large downswings in case of an industry slowdown, tough competition, or an investor shift away from ESG. Additionally, Workiva Inc. (NYSE:WK)’s long term aim is to grow its free cash flow margins to 22% by 2027, which makes cost control a key part of its hypothesis. These margins were 4% in 2023, and any misses in this area will affect the stock. Workiva Inc. (NYSE:WK) also suffers from high sales cycles as the key nature of its software in helping investors make decisions means that they carefully evaluate it before making a purchase commitment. Its sales are also dependent on the health of the broader deal making industry, which has only just started to increase its activity to potentially open up more avenues for growth.

Artisan Partners mentioned Workiva Inc. (NYSE:WK) in its Q1 2024 investor letter. Here is what the firm said:

Our profit cycle thesis is based on the company’s capability to identify and quickly roll out new products, effort to expand beyond North America and opportunity to benefit from increasing ESG regulatory reporting longer term. While the company reported financial results that exceeded expectations, shares declined due to disappointing forward guidance. However, we remain invested on the belief that trends are supportive of multiyear growth.