Without a doubt, one of the biggest technology stories over the last 10 years has been the migration to the cloud for computing, storage and a host of additional applications. Given the powerful growth, and the continued need for the software that is made by the top companies in the industry, aggressive growth investors need to consider a position in some of the top stocks.
In a new report, Goldman Sachs initiates coverage on 12 of the top stocks in this part of the sector. The firm notes in the coverage that there remains a staggering $1 trillion in total addressable market size. Clearly, there remains a massive level of upside.
Of the 12 stocks initiated, six are rated Buy at Goldman Sachs. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Adobe Systems
Shares of this high-profile old-school software company have really backed up in price and are offering investors a very solid entry point. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments: Digital Media, Digital Marketing and Print and Publishing. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition. Flagship products include Creative Suite, Photoshop, Acrobat, Premiere, Dreamweaver, Illustrator, InDesign and LiveCycle. PDF and flash technologies from the company have become industry standards and act as a platform for other Adobe products.
The Goldman Sachs price target is posted at $580, while the Wall Street consensus is set just lower at $565.87. The last trade on Monday came in at $473.44.
Microsoft
This is a more conservative way for investors to participate in the massive cloud growth and utilization. Microsoft Inc. (NASDAQ: MSFT) manufactures, licenses, and supports a wide range of software products. The company has transformed its business model from a component driven model (PC, server) to one driven by the need for cloud capacity.
Many Wall Street analysts agree that Microsoft has become a clear number two in the public or hyper-scale cloud infrastructure market with Azure, which is the company’s cloud computing platform offerings, and which continues growing at triple-digit levels. Some have flagged Azure as the biggest rival to Amazon’s AWS service.
Some analysts maintain that Microsoft is discounting Azure for large enterprises, such that Azure may be cheaper than AWS for larger users. The cloud was big in 2020 earnings reports, and it will remain a growing part of the software giant’s earnings profile. The company is scheduled to report fourth-quarter numbers today after the close.
Microsoft stock investors receive a 0.98% dividend. The Goldman Sachs price target for the shares is $285, and the Wall Street consensus target is $243.33. The stock closed on Monday at $229.53 per share.
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