5 Top Cloud Storage Tech Stocks to Buy Now

By Lee Jackson Published Mar 25, 10:15AM EDT

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If there is one thing that is becoming ubiquitous these days in storage, it is consumers and businesses going to the cloud. While the competition for lower-cost storage services tends to be a drag on margins, the overall picture is bright, and the market leaders are only getting stronger. In a new research report, RBC points out that it found no significant pricing cuts among the market leaders.

The RBC analysts think that the solid pricing picture is positive for some of the top companies in the arena. With data use and storage needs exploding, strong growth is expected. The five companies that RBC covers in the report are Amazon.com Inc. (NASDAQ: AMZN), Google Inc. (NASDAQ: GOOGL), Microsoft Corp. (NASDAQ: MSFT), Rackspace Hosting Inc. (NYSE: RAX) and VMware Inc. (NYSE: VMW).

Amazon.com

Amazon.com has a gigantic cloud storage business that continues to dominate rivals. In fact, Amazon recently announced that it will start announcing Amazon Web Services (AWS) results separately starting in the first quarter of this year. It is one of the companies that the RBC team thinks is a direct beneficiary of the current tame pricing scenario.

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The analysts also report that in January, AWS introduced a larger C4 instance class into its Amazon Elastic Compute Cloud (EC2) offer for compute-intensive workloads, such as online gaming, simulation and analytics applications.

The RBC team rates the stock at Outperform, with a $410 price target. The Thomson/First Call consensus price target is $395.41. Shares closed Thursday at $374.09 apiece.

Google

Google is making a big effort to compete with Amazon on the lower tier pricing for cloud storage. Recently, Google augmented its online backup offerings by introducing Nearline storage at a dirt cheap $0.01 per gigabyte per month. This matches Amazon’s Glacier storage service on price, but it offers significantly faster retrieval times for infrequently accessed data. This difference is Nearline does charge extra for data retrieval and early data deletion.

As with buying Amazon stock, Google offers investors multiple silos of business that augment the cloud storage area.

The stock is rated Outperform at RBC, with a $640 price target. The consensus target is posted at $650. Shares closed Tuesday at $577.54.

Microsoft

Microsoft’s Azure product offering has gained traction, and the software giant is increasing its presence in the cloud world. Microsoft rolled out the company’s G-series cloud offering back in January. With 448 gigabytes of RAM and 6.6 terabytes of local solid state drive storage, the roll-out for customers is currently limited to the western U.S. region. The RBC team points out that the Microsoft product offering beats Amazon by 80% on memory, and it is comparable on local storage and compute cores.

Microsoft investors are paid a 2.9% dividend. The stock is rated Outperform at RBC, and they have a $50 price objective. The consensus estimate is $47.06. Shares closed Tuesday at $42.90.

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Rackspace Hosting

Rackspace gets 31% of its total revenue from the public cloud, so the firming status of the current pricing bodes well for the company. It announced last fall that it was updating and modernizing its relationship with Microsoft and now offers support for Microsoft’s private cloud offering, along with added support for Google Apps. The stock has had a huge run, so investors may want to put it on a watch list for a pullback.

The stock is rated Market Perform at RBC with a $44 price target. The consensus target is $53.25. The stock closed Tuesday at $52.75.

VMware

The RBC team noted some changes at VMware in its research report. The company lowered pricing for cloud computing and self-service, pay-as-you-go options for public cloud. VMware touts that the vCloud Air product delivers two times the compute power of Microsoft Azure and three times the storage performance of Amazon’s AWS.

The RBC team rates the stock at Outperform, with a price target of $100. The consensus target is $96.08. The stock closed trading on Tuesday at $84.28.

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With cloud usage soaring, the competition among the giants will only increase. The barrier to entry for newer companies may be difficult, with these mega cap techs flexing their proverbial corporate muscles.

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.