As the S&P500 and Nasdaq 100 reach unprecedented highs, the tech sector takes the lead in the optimistic market rally, fueled by robust earnings and an improved U.S. economic outlook. Amidst this backdrop, let’s explore three buy-rated cloud stocks exhibiting strong growth momentum in both financials and price performance.
Arista Networks, Inc.
Rating- Moderate Buy
Arista Networks (NYSE:ANET) is a key player in the cloud networking solutions arena, offering Gigabit Ethernet switching, an Extensible Operating System (EOS), and cutting-edge routing platforms. The company’s recent announcement of the next-generation 7130 series 25G system highlights its commitment to ultra-low latency switching, specifically catering to high-frequency trading needs and 25G market data distribution.
With ANET set to report its latest financials on February 12, 2024, early indications suggest solid growth, including a noteworthy 28.3% revenue increase, a robust 54% GAAP net income growth year-over-year, and an improved gross margin of 62.4%. CEO Jayshree Ullal points to strong customer momentum in cloud/AI and enterprise sectors, with the full-year outlook anticipating revenue growth exceeding 33%. ANET appears poised for another strong quarter and a promising full-year release.
Pure Storage, Inc.
Rating- Strong Buy
Pure Storage (NYSE:PSTG) stands out with its innovative data storage products and services, offering unique solutions for unstructured and structured data across various workloads. The company’s Evergreen Storage-as-a-Service (StaaS) consumption service, aligned with a Cloud Operating Model, has garnered favor on Wall Street.
PSTG reported a robust quarter, with record sales from the FlashBlade portfolio rising by 13% year-over-year. Key metrics, such as subscription annual recurring revenue (ARR) and subscription services revenue, surged over 26% year-over-year. The company’s current non-GAAP operating margins at 22.2% are expected to remain strong at 19% in the next quarter, with an anticipated Q4’24 revenue reaching $782 million.
Palo Alto Networks, Inc.
Rating- Strong Buy
As a global cybersecurity powerhouse, Palo Alto Networks (NASDAQ:PANW) offers comprehensive solutions to secure networks, clouds, and endpoints using artificial intelligence and automation. Recent strategic acquisitions, including Talon Cyber Security and Dig Security, aim to bolster its SASE solution and enhance real-time capabilities for cloud protection.
PANW’s latest quarterly results showcased a 20% year-over-year revenue growth, with remaining performance obligations revenue increasing by 26%. GAAP net income skyrocketed by an impressive 871%. CEO Nikesh Arora attributes this stellar financial performance to heightened demand in the cybersecurity market. Forward projections indicate a positive outlook, with total billings expected between $10.7 billion and $10.8 billion, diluted non-GAAP net income per share ranging from $5.40 to $5.53, and a non-GAAP operating margin of 26% to 26.5%.
In conclusion, while buy-rated stocks from analysts provide valuable insights, investors should conduct thorough due diligence and gain a comprehensive understanding of the companies to identify any underlying issues.
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Author Faith Yakubu 
