Shares in this article
Cloud business as a future sector
Strong share price development in 2020
BofA’s top picks for 2021
The Corona crisis has caused major upheavals in the economy. But while cyclicals experienced some significant price drops on the stock exchange, things went better than hoped for the so-called Corona profiteers. In particular, it was IT companies with cloud business whose services were in demand in the past year 2020 in view of the increased trend towards home office and distance maintenance. Bradley Sills, Senior Equity Research Analyst at Bank of America Merrill Lynch, has announced his cloud favorites for the 2021 stock exchange year.
Windows manufacturer Microsoft has also established itself in the cloud business with Microsoft Azure. The BofA analyst believes the cloud division of the billion-dollar IT group will have strong business development: in five years, Azure could catch up with the market leader AWS in terms of market share, according to the stock expert. Microsoft could see double-digit growth in revenues in the next three to five years, which he attributes in particular to the success of Azure. In addition, he believes that Office 365 and the gaming business in connection with the Microsoft XBOX will also develop positively.
Against this background, Sills gave Microsoft shares a buy rating and set the price target at 256 US dollars.
The SAP rival Oracle is also one of BofA’s favorite stocks in the cloud segment for 2021. Unlike Microsoft, for example, the cloud business at Oracle is still at an early stage. When the past quarter was presented, the company was able to report a slight increase in sales across the group thanks to its cloud business. The IT group focuses in particular on doing business with business customers and provides them with data centers. A total of 29 data centers are now owned by Oracle, more than Amazon’s cloud subsidiary AWS operates, company founder Larry Ellison recently announced.
For BofA, Oracle is one of the companies with growth opportunities in the cloud market, but analyst Sills concedes that in the current year around 69 percent of Oracle revenues from the primarily growth-free business with on-premise license, maintenance and hardware business will come.
Oracle shares received a “neutral” rating, but the target price of 68 US dollars is above the current share price.
Workday also made it onto the recommendation list of the Bank of America Merrill Lynch. The company is well positioned, the expert believes, and points in particular to its strong market position in the human resources and finance sectors, because the company’s cloud software is used in the company’s finance and HR departments, where it is used for planning and Analysis tool used.
The strong customer base of 3,500 cloud customers gives Workday a competitive advantage, continues Sills.
His assessment of Workday shares is correspondingly positive: He recommends buying the share and has a price target of US $ 265.
With ServiceNow, Sills has another share in its cloud favorites list that had a strong 2020. The ServiceNow share reached new record highs in December, which was also thanks to the strong business development. The company is growing strongly and the BofA analyst expects the company to take on a leading role, especially in the automation of jobs. “ServiceNow fits well with our 4M framework for software investments – market, competitiveness, management strength and margin potential,” the expert says.
The stock is recommended for buying with a target price of $ 650.
Another top pick share from the cloud segment is Salesforce. The company made it onto Sills’ favorites list because of its large customer base and impressive organic growth. The latest quarterly results were positive: In the past quarter, the company earned 1.08 billion US dollars, which was well above the analysts’ estimates. The proceeds were also better than expected.
For Bradley Sills – in addition to the strong future prospects – reason enough to recommend the share as a buy. The price target is 275 US dollars, which means that Salesforce’s share price still has room for improvement.
Finanzen.net editorial team
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