In this article, we discuss the 5 cloud computing stocks to buy according to Cathie Wood. If you want to read our detailed analysis of Wood’s hedge fund and its recent developments, go directly to read 10 Cloud Computing Stocks to Buy According to Cathie Wood.
5. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 35
An American software company, Palantir Technologies Inc. (NYSE:PLTR) uses a cloud platform, Apollo, which provides a continuous delivery system, powering other software platforms. This cloud platform offers services in over 40 sectors and industries globally.
As of Q3 2021, ARK Investment Management grew its stake in Palantir Technologies Inc. (NYSE:PLTR) by 22%. The company accounts for 2.14% of Cathie Wood’s portfolio. In its recently announced Q3 results, Palantir Technologies Inc. (NYSE:PLTR) reported revenue of $392.1 million, which beat consensus by $5.54 million. Following the company’s earnings beat, Morgan Stanley lifted its price target on the stock to $24 from $22.
As per Insider Monkey’s Q3 data, the smart money is also taking interest in Palantir Technologies Inc. (NYSE:PLTR), as 35 hedge funds tracked by Insider Monkey were bullish on the company, up from 26 in the previous quarter. These stakes hold a consolidated value of $1.63 billion.
Guardian Fund released its second-quarter 2021 investor letter and mentioned Palantir Technologies Inc. (NYSE: PLTR) in it. Here is what the firm has to say:
“The success of the private sector to innovate in order to help people through the lockdowns and to produce vaccines at record speed at scale has been impressive. The fact that almost every public institution was struggling to be effective no matter how hard some of the people worked, shows the fundamental need of the public sector to become data-driven and invest in data infrastructure.
Government institutions have to partner with enterprises such as Palantir to become digitalnative. The public sector will always struggle to attract the most talented engineers as compensations cannot be justified with tax money and therefore this must be a partnership with specialized private enterprises. This is a great opportunity for Palantir especially as it has already shown to be capable of working with demanding and complex public institutions entrusting it to work on the most critical and sensitive matters.
The news section of Palantir’s website gives insight in where new business is coming from. The main opportunity is in enterprise software and the faster onboarding time and increased self-service of clients is a positive sign. We believe Palantir is becoming one of the more important global software companies.
In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”
4. Twilio Inc. (NYSE:TWLO)
Number of Hedge Fund Holders: 96
Twilio Inc. (NYSE:TWLO) is an American cloud communications platform that allows web developers to programmatically carry out communications using the company’s web service APIs. Recently, Barclays upgraded Twilio Inc. (NYSE:TWLO) to Overweight, with a $375 price target, presenting a 35% upside. Following the firm’s upgrade, the stock surged 3% on December 9.
At the end of Q3, 96 hedge funds in Insider Monkey’s database reported owning a $6.3 billion worth of stake in Twilio Inc. (NYSE:TWLO). In the preceding quarter, 98 hedge funds held stakes in the company, valued at $7.89 billion.
ARK Investment Management made its first investment of $209,000 in Twilio Inc. (NYSE:TWLO) during the fourth quarter of 2016. In Q3 2021, the company constitutes 2.48% of Cathie Wood’s portfolio. In Q3, Twilio Inc. (NYSE:TWLO) posted an EPS of $0.01, beating the consensus by $0.15.
RiverPark Funds mentioned Twilio Inc. (NYSE:TWLO) in its Q3 2021 investor letter. Here is what the firm has to say:
“TWLO shares were also a top detractor for the quarter. Just like after 1Q, despite another quarterly beat in 2Q, management guidance–which we believe to be conservative–disappointed some investors. Second quarter revenue of $669 million was up 67% year over year, significantly exceeding management’s guidance of 47%-50% revenue growth. Management guided 3Q21 revenue to 50%-52% revenue growth, which was ahead of expectations, but due to continued investment also guided to a non-GAAP operating loss of $25 million-$30 million, which was below the Street’s forecast of a $12 million loss.
The COVID crisis has accelerated the adoption of the company’s cloud-based, integrated communications platform that allows companies in a wide range of businesses to embed digital communications capabilities (video, chat, voice, SMS, fax, and email) into their customer facing applications without needing to build back-end infrastructure and interfaces. Twilio’s total addressable market is now greater than $40 billion, which should grow by 50% over the next few years, providing a strong secular tailwind for the company. We expect the company’s gross margin to continue to expand from 54% in the second quarter toward management’s long-term goal of 60%-65%, and, as the company grows to scale, we expect its non-GAAP operating margin to expand to 25%.”
3. Zoom Video Communications, Inc. (NASDAQ:ZM)
Number of Hedge Fund Holders: 57
An American communications tech company, Zoom Video Communications, Inc. (NASDAQ:ZM) offers services through a cloud-based peer-to-peer software platform. In Q3, the company saw a spike in the number of hedge funds having stakes in it. 57 hedge funds tracked by Insider Monkey were bullish on Zoom Video Communications, Inc. (NASDAQ:ZM), up significantly from 35 in the previous quarter. These stakes hold a consolidated value of roughly $2 billion, up from $670.2 million in Q2.
In Q3, ARK Investment Management increased its position in Zoom Video Communications, Inc. (NASDAQ:ZM) by 21%, and now holds a $2.1 billion worth of stake. The company represents 2.77% of the hedge fund’s 13F portfolio. In Q3, Zoom Video Communications, Inc. (NASDAQ:ZM) posted an EPS of $1.11, beating the analysts’ consensus by $0.01.
Zoom Video Communications, Inc. (NASDAQ:ZM) outperformed low analysts’ expectations in Q3, asserted Meta Marshall of Morgan Stanley, who lifted her price target on the stock to $365 in November, which represents a 40% upside. She kept an Overweight rating on the shares.
Artisan Partners mentioned Zoom Video Communications, Inc. (NASDAQ:ZM) in its Q1 2021 investor letter. Here is what the firm has to say:
“We concluded our campaigns in Zoom Video Communications. We have been paring our position in Zoom for several quarters, anticipating the reduced need for video conferencing as vaccination rates climb and people return to their workplaces. That said, we believe there is a strong case to be made that the pandemic has prompted a permanent inflection in videoconferencing’s importance—sustainably higher remote work arrangements, more online learning and less business travel. Furthermore, the company’s dramatically expanded user base (up 485% YoY in Q3) positions it well to cross sell additional services, Zoom Phone in particular. The long-term future remains bright, but we decided to end our successful investment campaign in favor of opportunities in our pipeline with more attractive near-term growth prospects.”
2. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 27
In Q3, ARK Investment Management increased its stake in UiPath Inc. (NYSE:PATH) by 102% and currently holds a stake worth $1.2 billion. The company’s cloud-based SaaS solution aids in managing automation work and resources in one place, making it one of the best cloud computing stocks to buy according to Cathie Wood.
In Q3, UiPath Inc. (NYSE:PATH) posted an EPS of $0.00, beating the estimates by $0.04. The company’s revenue for the quarter stood at $220.8 million, experiencing a 49.4% growth from the prior-year quarter. Following the company’s solid earnings, recently, Morgan Stanley upgraded UiPath Inc. (NYSE:PATH) to Overweight, with a $74 price target.
As of Q3, the number of hedge funds tracked by Insider Monkey having stakes in UiPath Inc. (NYSE:PATH) decreased to 27, from 46 in the previous quarter. However, the total value of these stakes stood at $3.62 billion in Q3, up from $3.45 billion in the preceding quarter. Apart from Cathie Wood’s hedge fund, Alkeon Capital Management was one of the prominent stakeholders of UiPath Inc. (NYSE:PATH) in Q3, holding over 12.5 million shares.
ClearBridge Investments released its Q2 2021 investor letter and mentioned UiPath Inc. (NYSE: PATH) in it. Here is what the firm has to say:
“We participated in the IPO of UiPath, a developer of software for robotic process automation that uses AI, natural language processing and design to streamline complex processes across a variety of technology environments. The company is an industry leader with a superior solution for leveraging software to optimize workloads. Organizations around the world are beginning to understand the power of automation, with momentum picking up toward fully automating business processes, a $60 billion market today that could grow to $200 billion or more by 2030. UiPath has a unique pricing model, broad partner ecosystem and thoughtful management team supporting one of the strongest growth profiles in technology. Risks we are watching include a partial cloud transition ahead and increased competition from larger software platforms over time.”
1. Square, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 98
An American financial technology company, Square, Inc. (NYSE:SQ) uses cloud POS software, a web-based point-of-sale system, that enables the users to process payments through the internet.
In Q3, Square, Inc. (NYSE:SQ) is the sixth-largest holding of ARK Investment Management, which holds over 6 million shares in the company, valued at $1.46 billion. Square, Inc. (NYSE:SQ) accounts for 3.52% of Cathie Wood’s 13F portfolio. Recently, BofA upgraded the stock’s price target to $221, while upgrading the shares to Neutral, appreciating the company’s CashApp business.
At the end of Q3 2021, 98 hedge funds tracked by Insider Monkey reported owning stakes in Square, Inc. (NYSE:SQ), up from 94 in the previous quarter. These stakes hold a consolidated value of over $8.8 billion.
RiverPark Funds mentioned Square, Inc. (NYSE:SQ) in its Q1 2021 investor letter. Here is what the firm has to say:
“We established a position in leading Financial Technology provider Square during the quarter. Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers).
The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion (due to pass through costs, gross profit is more reflective of top-line growth) and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $1.2 billion gross profit last year) has a particularly large opportunity with its powerful ecosystem of digital financial services including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app.
We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while most of the company’s current profit is from its Seller Business, we believe most of Square’s future value will be from its Cash App business.”
You can also take a look at 14 Best Cloud Computing Stocks To Invest In and 10 Cloud Software Stocks with Strong Growth Potential
