Enterprise adoption of cloud computing services is expected to
increase at a rapid pace in 2014, in order to have faster and
flexible access to large data archives. Per Cisco, enterprises are
using Big Data analytics to create competitive business advantage.
Moreover, enhanced collaboration services delivered through the
cloud can increase employee productivity and customer satisfaction.
Increasing consumer demand for video and audio streaming
applications are strong contributors to cloud computing growth.
Newer services, such as personal content lockers, are also gaining
Per IHS, global businesses will spend approximately $174.2 million
on cloud computing this year, up 20.0% from $145.2 billion in 2013.
IHS forecasts enterprise spending to further accelerate to $235.1
billion by 2017.
Healthy Outlook for Software-as-a-Service (SaaS)
The outlook for the cloud computing industry remains significantly
bright due to higher corporate spending, particularly on
software-as-a-service (SaaS) applications. These applications are
used by enterprises to manage customer, sales and operational data.
Forrester estimates that 25.0% of the total of $523.0 billion of
software applications will be available on a SaaS basis by 2020.
), 85.0% of new software is being developed for cloud and 25.0% of
the world's apps will be available on the cloud by 2016.
IDC aggressively estimates that SaaS delivery will constitute about
14.2% of all software spending and 18.0% of all applications
spending by 2016. IDC's 21.3% compound annual growth rate (CAGR)
forecast for SaaS reflects the strength of the new business model.
Badly Beaten Stocks Now Cheap
Although the ongoing momentum stock sell-off has badly affected
cloud-based stocks, we believe that these stupendous growth
projections are hard to ignore. The high expectations have not only
attracted start-ups but also traditional software providers such as
), overcrowding the market.
This has made it difficult for investors to select the right scrip.
Below we pick three exciting cloud-based software stocks that are
expected to exponentially benefit from a higher enterprise spending
and at the same time sport a good Zacks Rank.
) - Brightcove's flagship product Video Cloud helps users to
distribute high quality video to Internet-enabled devices quickly,
easily and in a cost-effective way. The company added 61 new
premium customers (35 from Unicorn Media acquisition), bringing its
total tally to 6,126 at the end of the first quarter.
This Zacks Rank #1 (Strong Buy) stock reported an impressive
first-quarter 2014, beating the Zacks Consensus Estimate by 46.67%
(7 cents). Revenues jumped 26.0% from the year-ago quarter to $31.1
million, with 41.0% coming from the media segment.
For the rest of 2014, Brightcove has significant growth
opportunities from the synergies of Unicorn Media acquisition and
new product launches (Video suite, Gallery for marketers).
) - Synchronoss provides mobile cloud solutions and software-based
activation for connected devices. The company has a strong
clientele that includes AT&T, Verizon Wireless, Vodafone,
Comcast and Apple.
This Zacks Rank #1 stock reported a stellar first-quarter 2014,
beating the Zacks Consensus Estimate by 15.38% (4 cents). Revenues
surged 24.0% year over year to $98.7 million, driven by 83.0%
year-over-year growth in cloud services revenues.
Synchronoss is expected to benefit from new customer wins, upcoming
launch of Apple's iPhone 6 and the removal of uncertainty
surrounding Comcast/TWC merger.
) - Marketo offers an integrated suite of applications that
comprises of marketing automation, social marketing, sales insight,
revenue analytics, marketing management and real-time
personalization. The company's customer base (3,215) includes the
likes of General Electric, Medtronic, Moody's, Symantec and Sony.
This Zacks Rank #2 (Buy) stock reported better-than-expected
first-quarter 2014, beating the Zacks Consensus Estimate by 20.51%
(8 cents). Revenues surged 64.0% year over year to $32.3 million,
driven by approximately 63.0% year-over-year growth in subscription
and support revenues.
Marketo has immense growth potential due to growing footprint in
the small & medium business segments as well as enterprises,
increasing strength in the emerging B2C market, strong product
portfolio and expansion opportunities in overseas markets.
Real-time and time-sensitive applications are expected to drive
cloud adoption over the next several years. We believe that the
mainstream adoption of Big Data analytics, Bring Your Own Device
(BYOD) and Internet of Things will further compel enterprises to
spend more on cloud-based software, services and resources, going
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