3 Cloud Stocks to Buy in the Zacks Top Rated Internet Software Industry

The growing need for cloud-related services currently has the Zacks Internet-Software Industry in the top 19% of over 250 Zacks industries.

As one of the trendiest areas in technology, here are several cloud-related stocks that were recently added to the Zacks Rank #1 (Strong Buy) list this week.

AppFolio APPF : After blowing out third-quarter earnings expectations in late October, AppFolio’s stock stands out in terms of growth and momentum. Providing cloud-based software solutions for the property management and legal industries, AppFolio’s third-quarter earnings of $0.59 per share came in 47% above estimates of $0.40 per share.

AppFolio also beat top-line estimates with third-quarter sales of $165.44 million, beating expectations by 6%. More impressively, Q3 earnings were up from EPS of $0.11 per share in the prior quarter, with sales up 32% from $125.08 million a year ago.

Annual earnings are now expected to rise to $1.62 per share. per share in fiscal 2023 versus an adjusted loss of -$0.02 per share. In conjunction with such high growth and expansion, AppFolio’s share has now risen over +90% this year.

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Cloudflare NET: With shares up +43% in 2023, Cloudflare is starting to gain some nice momentum after beating Q3 top and bottom line expectations last Thursday.

As a global cloud services provider that provides a range of integrated products, including website and application security, third-quarter earnings of $0.16 per share surpassed Year-over-year, Cloudflare’s earnings were up 167% from EPS of $0.06 per share in Q3 2022, with sales up 32% QoQ.

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Illustrating Impactful Demand Cloudflare expects high double-digit percentage growth on its top and bottom lines in fiscal 2023 and FY24. With the EPS numbers below, it’s notable that total sales are now expected to rise 32% this year and rise another 28% in FY24 to $1.64 billion, further illustrating Cloudflare’s lucrative earnings potential.

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Datadog (DOG): Rounding out the list is Datadog, which notably landed Zacks Bull of the Day, further reiterating its strong buy rating.

Datadog’s growth is compelling as a monitoring and analytics platform for developers running over 400 integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software.

Datadog beat Q3 expectations on Tuesday, posting EPS of $0.45, topping estimates of $0.34 per share by 32% on sales of $547.54 million, which beat estimates by 4%. Third-quarter earnings rose 95% from $0.23 per share. share a year ago with an increase of 25% compared to the previous quarter. Datadog’s stock is up a very respectable +36% YTD, and most notably, annual earnings are now expected to rise 34% in FY23 and jump another 14% in FY24 to $1.51 per share.

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Bottom line

Growth in cloud services has been remarkable, and investing in AppFolio, Cloudflare, and Datadog’s stock is starting to look like a very viable way to cash in on the broader expansion of the Internet software space.

5 shares set to double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2023. Previous recommendations are up +143.0%, +175.9%, +498.3% and +673, 0%.

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Most of the stocks in this report fly under the Wall Street radar, providing a great opportunity to get in on the ground floor.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.