3 Stocks to Leverage the Cloud Computing Boom in 2020

3 Stocks to Leverage the Cloud Computing Boom in 2020

Cloud computing has transformed the way organisations operate their businesses today. The technology also drives customer’s demand for faster, more responsive and effective systems and applications.

Notably, the global business environment is transforming quickly with cloud computing capturing a significant share of traditional tech spending. Therefore, cloud-computing strategies have seen accelerated adoption within enterprises. According to media sources, by 2020 end, ~80% of businesses are likely to shift to the cloud.

Ever-increasing acknowledgement has made cloud computing one of the most pursued platforms in the technology universe.

Cloud Computing Trends

Increased Demand for Cloud Stocks

Cloud computing has been playing a vital role in reducing the overall capital spending. Small and medium-sized organisations can adopt on-premises or in private cloud infrastructure via the hybrid cloud - all thanks to public cloud resources. This hybrid cloud service helps to lower costs and makes the infrastructure applications more accessible across the cloud.

Also, cloud computing offers reliability, safety, consistency, and optimal consumption of resources. This has compelled enterprises and organisations to embrace cloud computing.

Cloud Computing Getting Majority

According to media resources, the desire for public cloud services in Australia continues to increase. A recent study reveals that around 42% of businesses in Australia are currently using cloud computing platform, an increase from 31% in 2015-16.

The growing acceptance of public cloud computing services makes it ideal for clients and organisations to pay only for computing, networking and storage while getting rid of regular expenditures for updating their servers and software regularly.

Further, cloud computing helps businesses to concentrate more on critical operations. At present, various start-ups are embracing the cloud to reduce overhead expenditure and preserve infrastructure. In fact, a cloud service provider offers enhanced customer support via its easy-to-navigate set of applications. The platform leads to customer satisfaction as the employees can easily access the information from anywhere and everywhere and at any time.

Cloud Computing Space Shows Encouraging View

Out of the three essential cloud computing services, namely software-as-a-service (SaaS), infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS), SaaS will remain the largest segment, according to media resources. In 2020, SaaS is expected to increase to $116 billion on the back of a better-than-expected demand for subscription-based software services. IaaS and PaaS are expected to reach $50 billion and $39.7 billion, respectively, over the same period.

Another media resource stated that Australia’s cloud IaaS market continues to grow and is expected to reach approximately $1.2 billion by 2022, up from $688 million in 2018.

3 Cloud Stocks to Watch Out for

Given the encouraging projection for the cloud-based platform in 2020, it would be wise to invest in these three promising stocks.

Webjet Limited (ASX: WEB)

Webjet Limited is a leading supplier of online travel services in Australia and New Zealand. The company is involved in the digital travel business, including both consumer markets and wholesale markets worldwide.

Financial Highlights for FY2019 Period Ended 30 June 2019: In FY19, the company’s total transaction value (TTV) stood at $3.83 billion, up 27% year over year. Revenues in FY19 came in at $366.4 million, soaring 26%. The company reported EBITDA of $123.1 million, an increase of 43%. EBITDA margins expanded 395 basis points and came in at 33.6%. Net profit after tax increased 45% to reach $60.3 million. Earnings per share during the period stood at 47 cents, up 30%. The company paid a final dividend of 13.5 cents in FY19 (fully franked).

In FY19, the company’s webBeds business reported 3.44 million travel bookings, soaring 51% year over year. WebBeds’s TTV for the period came in at $2.15 billion, up 59%. Revenues for WebBed business came in at $184.5 million, an increase of 62%. EBITDA margin was 36.4%, up from 23.8% reported in the year-ago period.

Outlook: For FY20, the company anticipates TTV from Thomas Cook to be in the range of $150-200 million. Webjet Limited expects EBITDA from webBeds business to be in the band of $27 million to $33 million.

Stock Performance

Webjet Limited has a market cap of $1.77 billion with ~ 135.6 million outstanding shares. The company’s stock closed at $13.070 on 02 January 2020, up by 0.384% relative to the previous close.

LiveHire Limited (ASX: LVH)

LiveHire Limited is a supplier of cloud-based human resources software and platform services. The company, through its direct sales, channel partners and adoption of the LiveHire technology, is aiding its growing number of client achievements.

Quarterly Highlights for the Period Ended 30 September 2019: The company, in its September quarter results, reported Annualised Recurring Revenue (ARR) of $2.7 million, an increase of 65% year over year basis. The increase was primarily due to the addition of 10 new customers (net 7 after churn). The total number of customers for the period was 86 customers, an increase of 46%. The company exited the quarter with cash of $30.3 million.

Outlook: The company expects organic growth, both domestically and internationally. Also, it plans to enter the US market on a regular basis via channel partners.

Stock Performance

LiveHire Limited has a market cap of $67.99 million with ~302.16 million outstanding shares. The company’s stock closed at $0.230 on 02 January 2020, down by 2.22% relative to the previous close.

NextDC Limited (ASX: NXT)

NextDC Limited is a technology-based company that builds and operates independent data centres in Australia.

Financial Highlights for FY19 Period Ended 30 June 2019: Revenues for the period came in at $179.3 million, soaring 15% compared to the previous year. The company reported underlying EBITDA of $85.1 million, up 13%. Statutory net loss after tax in FY19 stood at $9.8 million, as compared to a profit of $6.6 million reported in the year-ago quarter. Underlying capital expenditure for the period came in at $378 million, up from $285 million reported in the year-ago period. Partners and customers for the period rose over 60 and 22%, respectively.

Outlook: For FY20, the company anticipates revenues to be in the band of $200 million to $206 million. The company expects underlying EBITDA to be between $100 million to $105 million.

Stock Performance

NextDC Limited has a market cap of $2.27 billion with ~ 345.39 million outstanding shares. The company’s stock closed at $6.530 on 02 January 2020, down by ~0.76% relative to the previous close.


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