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2 Stocks To Buy Amid The Accelerated Adoption Of Cloud-Based Computing

2 Stocks To Buy Amid The Accelerated Adoption Of Cloud-Based Computing

If your head is in the cloud, you may want to consider these 2 stocks.

The coronavirus pandemic has sped up a lot of trends, one of which is the accelerated adoption of cloud-based computing services.

And this week, Mizuho Securities analyst James Lee said in a note that new contract activity for cloud computing has recovered to 85% of the pre-COVID levels, which should only accelerate into the second half of 2020.

“Enterprises are becoming more urgent on cloud migration, with emphasis on database management, cybersecurity and automation,” Lee wrote in the note. “Demand increased from core verticals such as financial services and retail. The biggest surprise was health care, which has been lagging in cloud computing, but COVID-19 accelerated adoption due to telemedicine and digitizing patient data.”

In the note, Lee reiterated his Buy ratings for Amazon (NASDAQ: AMZN) and Google-parent Alphabet (NASDAQ: GOOGL, GOOG), boosting his price target for AMZN to $3,450 and $1,650 for Alphabet.

That’s possible upside of 15% for Amazon shares and 9% for Alphabet. 

“We believe that higher utilization for data migration to the cloud and database management applications is favorable for Amazon Web Services as it has the largest infrastructure service, the most advanced technology, and a comprehensive ecosystem for native database management,” Lee wrote. 

As for Alphabet, Lee said increased demand for cloud services from the retail sector is “modestly positive” for the company’s Google Cloud Platform.

“For retail, the goal of investment in the cloud is to transform the retail environment by digitizing inventory and automating payments in order to compete with e-commerce pure plays,” Lee said. “For health care, which has been lagging in cloud adoption, we believe it reached an inflection point recently as hospitals are migrating to cloud due to increased demand for telemedicine, [customer relationship management] and patient database management.”

Citigroup analyst Jason Bazinet also boosted his price target on Amazon, to a street high of $3,550, saying that the e-commerce giant is “one of the most compelling stocks we cover.”

“First, in the core e-commerce business, there is simply more room for growth than there is in the digital ad world,” Bazinet wrote in a note. “Second, Amazon’s e-commerce market share is higher in the U.S. than it is in the rest of the world. Those robust U.S. market share figures may foreshadow higher e-commerce penetration in the rest of the world. Third, and perhaps more important, the core e-commerce business is where the Amazon story begins. E-commerce sales allow Amazon to gain scale in key infrastructure that can be used to provide higher margin services to businesses.”

“Here is the punchline,” Bazinet continued, pointing to Amazon Web Services. “We see a lot of future growth in B2C e-commerce driven by both category growth and share gains, particularly outside the U.S. And, we see incremental—and more profitable growth—in Amazon’s B2B segments.”

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