Emerging Phoenix in the Glooming Stock Market amidst COVID -19

 

Title :   Emerging Phoenix in the Glooming Stock Market amidst COVID -19

It has been more than 6 months and still the Covid 19 pandemic is not getting over yet. Lots of uncertainties in every industry are cropping up. 

 Hence, its immensely necessary to boost “Financial Immunity” with some wise investments in emerging stocks. While most of the industries are facing repercussions of Covid 19, some industries are in boom and also expected to be in boom for medium to long term time space. Yes, we can say this situation as ‘Blessings in Disguise’ but it’s true.  

 

From the US market perspective, expanding industries comprise of Cloud Service Provider Industry, FMCG (Fast Moving Consumer Goods) industry, Media Industry, online shopping (e-commerce) industry and credit card industry (Due to increased online transactions).

Now, Let’s give special attention to the ‘Showstopper’, the most emerging and manifold expanding Industry, that is IT Industry in broad definition. To be very specific the one wing of this industry is contributing extraordinarily which is ‘Cloud Service’. 

 As the ‘Work from Home’ or Remote working is becoming an immensely essential part of ‘New Normal’ social phenomenon in the US and even at Global level, the ‘Cloud Services’ are and will definitely become inevitable substance of work culture at currently and in future also. 

 Generally, there are two major ways of keeping your company profitable which are 

1. Either Increase your Revenues from business expansions and operations OR 

2. Cut on your operational Expenses.

Amidst Pandemic, the 1st option has limitations so companies are opting for the cost cutting to maintain their ‘Financial Status Quo’. So, most of the companies are going opting for Cloud. 

The cloud computing offers you benefits such as:

• High Flexibility: Cloud platform service provides offers many services and packages which can be flexibly used according to individual organisational needs. Additionally, as Data is securely stored at Cloud, the devices are only mediums so in case of any difficulty one can work through other device or cell phone also from any location where the internet services are available. 

• 24/7 Service Availability: While working at organisation level, Data centres have limitations in recovering from disruptions but in case of cloud, there is 24/7 availability of the services without minimum downtime. 

• Cost Cutting Aspect:   from the view point of Covid 19, the cloud services are helping companies to cut major portion of their expense on technology infrastructure, working space rent, electricity, and connectivity expenses. 

• Compliance Costs: At organisation level many regulatory and compliance expenses are there such as certification costs, regional compliance and others. But in case of Cloud services the respective service provider takes his share of responsibility so the company can concentrate on work more peacefully. 

Benefits to the Cloud Service Provider Companies

The cloud service providers (CSP) offer Hardware provisioning on shared platform which allows them to earn revenues in manifolds with rapid market expansion. 

Now, the major and emerging stocks in the US market from IT and Cloud Industries are 

1. AWS (Amazon Web Services) (Amazon)

2. GCP (Google Cloud Platform) (Alphabet Inc.) 

3. AZURE (Microsoft)

1. AWS:   

Strengths of the stock:

Its parent company is Amazon, which is a globally renowned brand with best services. AWS offers plethora of various established cloud services which can be customised according to specific organisational needs with minimum downtime.

• Weakness: 

 The company cannot decrease its subscription costs below certain limit. 

Financials: 

Its TTM based EPS is favourable at $26.04 whereas its TTM based P/E may apparently feel overvalued at 123.09x, it is suitable to its expanding business model and AWS services. Its revenue CAGR is also good at 24.3%. and expected to augment based on increasing product and services demand in future. 

2. GCP (Alphabet Inc.)

Strengths of the stock: 

The company offers affordable service packages along with the many free services of Google such as Google Meet, Duo based on their own android platform and Gmail storage or G-Drive Storage facility etc. 

Weakness:

Occasional network downtime is sometimes observed. 

Financials: Its TTM P/E ratio is 33.17x and its same time EPS is $44.84 which seems favourable and expected to boom in near terms based on demand for their services on global platform.

3. AZURE Microsoft:

Strengths of the stock;

Generally, most of the companies have Microsoft software and operating systems from old times.  The company offers migration and licenses at affordable costs. 

Weakness:

Generally, in Cloud services, if more resources are required it will automatically expand its resource capacity as per the requirement.  However, sometimes IT organisations complain on capacity part when it comes to Azure. 

Financials:

Its current time P/E is 36.87x which apparently may feel overvalued but it seems feasible when taken into account is expansion and business capacity with future growth. 

Its current EPS is $5.76 which denotes ample room for development and growth ahead. 

• Competition Situation

As, there is no limitation on availing more than one service provider, the companies prefer to secure data and cloud on multiple platforms such as on AWS and AZURE simultaneously to ensure business continuity. Hence, all the major CSPs are in Win- Win situation currently. Though there are other players also like Oracle, IBM, Salesforce however majority of the market share is captured by these 3 CSPs. 

On closing note, from the US stock market point of View, wise investment in these top Cloud Service stocks will definitely take the investors to the ‘CLOUD 9’ in the long term.

By:

ABCD of Investment by Madhura P karekar