The entire market cheered Fed chief Jerome Powell’s indication that the peak of the rate hike cycle was near, but no sector cheered as loudly as cloud stocks. Many cloud stocks gained double-digits, some as much as 20%, on the combined impact of relief and robust results. Takeaways from the reports include:
- Top and bottom line strength
- Double-digit growth
- Widening margin
- Improved profitability
- Improved guidance driven by volume and penetration gains aided by AI
In all cases, the price action confirms support, and in most, it points to bottoming, reversal, and sustained rally.
CyberArk surges 10%; raises guidance
CyberArk Software Ltd. (NASDAQ: CYBR) is a cybersecurity platform headquartered in Israel. The company reported a top- and bottom-line beat in alignment with the group and drove its share price up 10%. Key takeaways from this report are revenue growing 25% on a 68% increase in subscriptions. Annual recurring revenue also increased significantly, about 38%, leading the company to raise guidance.
Guidance raised to a range with the low end above the consensus may still be cautious. Cyber security is among the most in-demand cloud services and should grow at a 10% CAGR for the next few years (a low estimate given the pace of total cloud growth).
CyberArk analysts have yet to issue any revisions based on the new data, but the trend in sentiment is bullish. Twenty-one analysts rate the stock a consensus "moderate buy" with a price target above current action and trending higher. The price action in this stock confirmed an uptrend and is poised to retest or break through the $180 level.
Lightspeed gains 15% on wider margins
Lightspeed Commerce Inc. (NYSE: LSPD), a SaaS payments solution for small merchants, had a solid quarter, with top and bottom-line results outpacing consensus. Revenue grew by 25%, matching CyberArk, and a widening margin compounded it. The company reported four cents in adjusted earnings to outpace the Marketbeat.com consensus by six cents and put profits on the table earlier than anticipated.
The best news is that guidance was raised above the then-current consensus and includes sustained profitability. Because the solid balance sheet carries about $0.775 billion in cash and securities, this company has emerged from its start-up phase and matured into a going concern. Analysts rate this stock a "hold" and see it increasing by 32% at the consensus. The low price target of $14 is now below the price action and suggests a floor for the market.
Fastly: operating losses shrinking fast
Fastly Inc. (NYSE: FSLY) operates a platform-as-a-service, providing edge-computing services to businesses. Its platform processes, secures and serves client applications for use at the edge of the cloud. The CQ3 revenue growth is the weakest in this group but remains steady compared to prior quarters and outpaces consensus.
Margin and earnings excited the market; the company posted a loss as expected but 25% smaller than forecast, and strength should build. Guidance raised, but the range is tepid compared to the consensus estimates. The analysts' sentiment and price targets are trending higher, leading the market.
Palantir broadens its client base; S&P inclusion imminent
Palantir Technologies Inc. (NYSE: PLTR) had a solid quarter, posting 16.8% top-line growth and a wider margin. The critical details within this report are that government spending remains strong and commercial business is booming. This company also raised guidance above the consensus and sent its shares up more than 20% at the session’s high.
However, analysts don’t like this stock and see it moving significantly lower. If that doesn’t change, the market could be capped. If the analysts begin to change their tune to get back on the right side of this trade, they could propel it above $20 and confirm a complete reversal in this market.
Shopify leads the group
Shopify Inc. (NYSE: SHOP) led the cloud services group with a revenue gain of 30%, adjusted for the sale of its logistics business. That strength and details within the report sent its shares up more than 22% to lead the group’s price gain.
Those details include a 24% increase in gross merchandise volume, a 29% increase in subscriptions and a 32% increase in monthly recurring revenue that together show accelerating business.
Analysts' activity has been stable this year, with consensus pegged at Hold and the price target trending near $64; the post-release activity includes an upgrade that may signal a shift in the market. This stock bottomed last year, but now it shows the potential to complete a reversal.