Baird Cites Massive Cloud Growth as Reason to Buy 4 Red-Hot Stocks

By Lee Jackson Updated Jan 11, 7:23PM EST · Published Aug 15, 7:56AM EDT

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It’s been going on for some time, and many on Wall Street see it continuing. Technology has been the leading sector in the markets, and there is little reason to think that comes to an end anytime soon. After all, the United States is the leader globally in the sector, with many of the top companies based in Silicon Valley area near San Francisco. With demand and innovation continuing to explode, there is little reason to sell the sector now.

Top Wall Street analysts have made the case that total addressable market for the public cloud could be a stunning $155 billion by 2023. Compound annual growth rates are expected to be at 27% to 29%, which represents phenomenal growth.

A new Baird research report cites very positive earnings reports from cloud communications companies as a main reason to remain very positive on the industry. Shares of these four top companies are rated Overweight, and all make sense for aggressive growth accounts.

Bandwidth

This under-the-radar stock offers solid upside potential and a less crowded trade. Bandwidth Inc. (NASDAQ: BAND) is a cloud-based communications platform-as-a-service provider that enables enterprises to create, scale and operate voice or text communications services across any mobile application or connected device or enterprises.

Bandwidth’s solutions include a broad range of software application programming interface (API) for voice and text functionality and IP voice network. The company offers sophisticated and easy-to-use software APIs that allow enterprises to enhance their products and services by incorporating advanced voice and text capabilities. It also offers advanced monitoring, reporting and analytics, superior customer service, dedicated operating teams and personalized support.

The Baird price target on the shares is $44, and the consensus Wall Street target is $44.33. The stock closed near both levels on Tuesday at $44.16.

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8X8

This company has posted solid results this year and has long been touted as a potential takeover target. 8X8 Inc. (NASDAQ: EGHT) offers a cloud-based solution for business communications and collaboration on a unified platform spanning voice, video, contact center, and desktops, that replaces legacy and expensive on-premise systems.

The service is delivered as an application that follows the user regardless of device (office phone, smartphone, desktop, tablet). Features include voice, video, text, fax, audio conferencing and integration with enterprise resource planning and customer relationship management systems.

Baird has a $26 price target, and the consensus target is $24.80. The shares closed Tuesday at $22.45.

Twilio

This may be the top stock to own in this fast-growing segment. Twilio Inc. (NYSE: TWLO) provides cloud communications platform that enables developers to build, scale and operate communications within software applications through the cloud as a pay-as-you-go service in the United States and internationally.

The company offers programmable communications cloud software that enables developers to embed voice, messaging, video and authentication capabilities into their applications through application programming interfaces. It also provides use-case products, such as a two-factor authentication solution.

The company blew out second-quarter results, with base revenues accelerating to 54% year-over-year, compared with low-to-mid 40s the past few quarters. Retention increased again to 137% (128% in 2017) and 145% without Uber (in-line with the first and up from 137% in 2017).

The $82 Baird price objective is well above the consensus price target of $75.31. The shares closed Tuesday at $76.75.

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Vonage

This stock has been in and out of the investors’ doghouse for years. Vonage Holdings Corp. (NYSE: VG) is a provider of cloud communications services for businesses and consumers, as well as consumer and communication solutions across multiple devices.

For business services customers, the company provides cloud-based unified communications as a service solutions, consisting of integrated voice, text, video, data, collaboration and mobile applications over its scalable session initiation protocol based voice over internet protocol (VoIP) network.

Through its cloud-based middleware solution, gUnify, the company provides customers the ability to integrate its cloud communications platform with various cloud-based productivity and customer relationship management (CRM) solutions, including Google’s G Suite, Zendesk, Salesforce.com Sales Cloud, Oracle and Clio.

Both the Baird price target and the consensus figure are $15. The shares closed Tuesday at $14.36.

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Four smaller capitalization companies that are all good plays for investors looking to own cloud communications companies. Again, all are better suited for more aggressive investors with higher risk tolerance.

About the Author Lee Jackson →

Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad and diverse career, which included a stint as the creative services director at the NBC affiliate in Austin, Texas, gives him unique insight into the financial industry and world.

Lee Jackson's journey in the financial industry spans over 30 years, with nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career was marked by his presence on the sell side during pivotal Wall Street events, from the dot.com rise and bubble to the Long Term Capital Management debacle, 9/11, and the Great Recession of 2008. This is a testament to his resilience and adaptability in the face of market volatility.

Lee Jackson’s practical financial industry experience, acquired from a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing on various platforms. This unique combination allows him to shed light on the intricacies and workings of Wall Street in a way that only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.

Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.