If not facing outright closure, many businesses are having to affect a pointy shove within the direction of digital-only operations — a fast-growing trend that quickly went from high priority to absolute must. the planet is going to be a changed place once the dust settles, and therefore the mobility and cloud computing infrastructure that supports it just got cemented into place.
Companies that were already beneficiaries of the growing cloud computing movement might be certain some short-term pain alongside everyone else as they affect the lockdown to halt the spread of the pandemic. except for the future, these stocks are timely buys immediately. Three that I’m eyeing are salesforce.com (NYSE: CRM), Twilio (NYSE: TWLO), and Upwork (NASDAQ: UPWK).
The cloud pioneer still pushing its boundaries
Salesforce began as a creator of sales and repair software — which are still high-growth segments and more important than ever before. Salesforce partner and digital consultant Avionos report that 92% of surveyed corporate purchasers say a knowledgeable and trusted salesperson is going to be key to helping them navigate an economic downturn.
That underscores the important role Salesforce has taken on in recent years, also as how it’s expanded to encompass tech well beyond its original niche. quite just technology that helps businesses be more efficient, the software platform is central to several organizations’ managing of customer relationships in the least levels. As a result, cutting spending on such initiatives is probably going to be far down the list when it comes time to stiffen corporate budgets, which could make Salesforce a relative shelter during the present crisis.
Besides potential growth, Salesforce also entered 2020 in tip-top shape. the corporate had $7.95 billion in cash, cash equivalents, and short-term investments on the record and just $2.67 billion in debt. The cloud pioneer has continued putting its assets to figure and flexing its muscles, acquiring several smaller firms thus far this year, including the pending purchase of digital transformation company Vlocity for $1.3 billion.
Not all investors are comfortable with this strategy, but Salesforce nevertheless features a long diary of turning its own organic growth and bolt-on acquired businesses into strong free income generation (i.e. what’s left after cash operating expenses and capital investments during a given period). The stock trades for 34.8 times a 12-month free income, a premium to make certain even after an enormous double-digit pullback, but not totally unreasonable given the continued potential for this cloud computing platform within the decade ahead.
Building data communication for everybody
Another cloud company that would see continued demand for its wares is Twilio. While far smaller than Salesforce and so far unprofitable, this provider of cloud-based software tools has grown quickly within the last decade and is essentially liable for jump-starting the communications platform-as-a-service industry.
Consumers both business consumers and personal individuals — are favoring high-touch communication delivered anywhere and in any format. Traditional call centers and even informational websites can’t achieve this. Organizations now got to stay in-tuned with customers across not just traditional voice and text but also digital chat, email, video, and secure web login. With numerous people confined to home thanks to the pandemic, these virtual touchpoints are more crucial than ever.
Besides being in high-growth mode (organic revenue grew 47% in 2019), i feel Twilio may be a buy after shares have tumbled from all-time highs. The stock trades for 10.6 times trailing 12-month revenue, a high tag but rock bottom valuation pegged to the cloud platform since mid-2018. And though free income ran at negative $53.2 million within the last year, Twilio had $1.85 billion in cash and short-term investments on the books at the top of 2019.
The company is now turning its attention to its Flex platform, the culmination of a decade’s worth of learning applied to an easy-to-use and instantly customizable contact center service for businesses looking to evolve for the digital age. Shares will take investors on a volatile ride, but this small tech outfit features a lot going for it immediately.
Working from home just got a lift
We’ll end this conversation with a good smaller and more niche cloud play: Upwork, the leading platform for connecting employers with freelance talent. Besides employing machine learning to assist pair up the proper task with the proper professional, Upwork also provides communication and collaboration tools for its customers, also as invoicing and payment services.
The small-cap stock has gotten even smaller in recent months, tumbling from overflow $20 a share shortly after its IPO in late 2018 to only over $7 a share as of this writing. That puts the company’s market cap at just $826 million — a mere 2.6 times 2019 revenue. There are good reasons for this: the highest line has been decelerating, as growth was forecast to be 13% to fifteen in 2020, which was before the coronavirus began to pack up wide swaths of the economy. With organizations halting hiring and employees getting furloughed, Upwork might be certain some lean times.
However, break-even was in view (free income was only negative $15.6 million last year), and therefore the books showed $134 million in liquidity and just $18.3 million in debt at year-end. Upwork is well-funded to survive a recession and still invest in its growth. In fact, the worldwide gig economy — a workforce that favors flexible employment terms and freelance work — has been forecasted by some researchers to just about double within the next few years. While much of that growth could come from the ridesharing industry, it’s nevertheless a positive trend that would favor Upwork.
For this small-cap stock, my typical caution applies here: stock small batches over time while building out a bigger position. Even after their precipitous fall, shares of Upwork should remain highly volatile. But over the future, the potential for this cloud platform looks too great, and its shares too cheap, to be ignored.