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Cloud Stocks: Six Cloud Stock Picks Based on PaaS Prospects

Posted on Tuesday, May 7th 2019
Image by Dimitris Vetsikas from Pixabay

Cloud products often tend to have low switching costs. The best way to create exit barriers is to have a Platform-as-a-Service (PaaS) strategy and invite entrepreneurial developers to come develop apps on it. As apps gain traction, some of the startups developing them can be acquired. Integration is easy because of the technology stack compatibility.

This is my analysis of how SaaS companies need to be scaled inorganically.

With this lens on, I have identified a set of cloud stocks that look promising for the next decade.

1. (NYSE: CRM). Their lead is so great in this space, that the chance of anyone else catching up is minuscule if not zero. Further analysis here.

2. ServiceNow (NYSE: NOW). Their PaaS strategy is more recent, but it is starting to gain traction. I foresee excellent execution on this front, and the performance will be reflected in the stock price. Currently, about 350 applications are in the marketplace. I also expect ServiceNow to acquire from this pool. Further analysis here.

3. Workday (NYSE: WDAY). Their PaaS strategy is relatively new.  Further analysis here.

4. Twilio (NYSE:TWLO). PaaS is core to their strategy. What they need, however, are System Integrator partners that take the PaaS into enterprises and find new use cases. Startups like Uber constitute a very large percentage of their revenue mix. I am watching for signals on what other startups have the potential for significant revenue impact. Further analysis here.

5. Atlassian (Nasdaq: TEAM). Excellent company. Excellent PaaS strategy that is starting to take off. They have also started acquiring from their PaaS developer eco-system. It has a thriving marketplace that offers more than 1,500 Jira apps and nearly 850 Confluence apps. Further analysis here.

6. Splunk (NASDAQ: SPLK). PaaS is core to their strategy. Cyber Security is becoming a core use case. I would want to know what other use cases are gaining traction besides security. Further analysis here.

A number of companies are currently following API strategies and haven’t come up with fullyfleshed out PaaS yet. These include Zendesk (NYSE: ZEN), Hubspot (NYSE:HUBS), and Smartsheet (Nasdaq: SMAR). Further analysis here:

Zendesk and Freshworks Follow Different Acquisition Strategies

HubSpot Acquired 9 Smaller Start-ups

What Apps Would Add Fuel to Smartsheet’s PaaS Strategy?

There are some other companies to look at that have interesting PaaS strategies: Amazon, Google, Microsoft. None of them, however, are pure plays, and their stocks have many other factors influencing them. I have, however, analyzed their PaaS strategies if you’re interested:

Which Amazon PaaS Products are Gaining Traction?

Google Should Emphasize PaaS and AI Strategy to Mitigate Advertising Slowdown

Microsoft Became a Trillion Dollar Company Thanks to Azure

Intuit and Xero have interesting PaaS strategies, but are not pure plays. You can review my analysis here:

Open Platform Strategy Stands Intuit in Good Stead

Xero Grows Through International Acquisitions

SAP and Oracle also have PaaS strategies that you can review here:

What Should SAP Acquire to Triple its Value by 2023?

A Look at Oracle’s 2018 M&A Activity

Adobe has a PaaS strategy: Adobe Delivers Via PaaS

Finally, Shopify has had a tremendous stock run up and has a very good PaaS strategy. Further analysis here. I do not recommend this stock because it has a significant looming threat from Amazon.

If you’re an equity analysis covering any of these stocks, happy to dialog here.

Related readings:

SaaS Companies NEED PaaS Strategy

Calling ALL PaaS Leaders

This segment is a part in the series : Cloud Stocks

. Smartsheet Acquiring Bootstrapped Startups to Drive Growth
. Bootstrapped Unicorn Atlassian is Acquiring Capital Efficient Startups
. Netflix Price Hike Ruffles Competition
. How Will Carbon Black Differentiate?
. ServiceNow Grows Through Addition of Capital-Efficient Startups
. Zendesk and Freshworks Follow Different Acquisition Strategies
. Tableau Grows Through Small Acquisitions
. Open Platform Strategy Stands Intuit in Good Stead
. SaaS Companies NEED PaaS Strategy
. Will GoDaddy Follow the PaaS Route?
. Calling ALL PaaS Leaders
. Adobe Delivers Via PaaS
. A Look at Oracle’s 2018 M&A Activity
. What Apps Will Drive More Traction for Cloudera?
. Slack's App Focus Will Be Key to Post-IPO Success
. IBM Counts on its Cloud and Platform for the Turnaround
. Atlassian Acquires From its PaaS Marketplace
. What Should SAP Acquire to Triple its Value by 2023?
. Expect ServiceNow to Acquire From App Marketplace
. Should Follow a PaaS Strategy?
. Six Cloud Stock Picks Based on PaaS Prospects
. How Upwork Can Leverage the Virtual Company Trend
. Qualys Scouting For Acquisitions
. Should SAP Acquire Zendesk or Freshworks?
. HubSpot Counts on its API Strategy
. SurveyMonkey Eyes Acquisitions for Growth
. Workday Wants to Disrupt Cloud Computing Using Machine Learning
. Einstein and Open-Source Platform Lead the Charge for Salesforce
. DocuSign Prepares to Beat Rival Adobe
. Veeva Soars, But Dassault Acquires Medidata for $5.8 Billion
. Tableau Acquisition Signals Massive Analytics Push for Salesforce
. Oracle Joins Hands with Microsoft to Take on Amazon
. GoDaddy is Making Strategic Acquisitions for the Next Level of Growth
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. Is Slack Overvalued?
. How Will Cloudera Address the Competition?
. Zoom is Not Bothered by Cisco or Microsoft
. Domo Counts on Enterprise Revenue for Growth
. Netflix Plays with Pricing and Games to Attract Subscribers
. CrowdStrike Has a Successful IPO
. Atlassian Crosses the Billion Dollar Revenue Milestone
. ServiceNow Believes Strength Lies in Tie-ups
. Partnerships are the Mantra for BlackLine
. SurveyMonkey Counts on Enterprise Segment for Growth
. HubSpot Soars to a New High
. Intuit Pushes AI to Simplify Tax Filing
. Splunk Sees Strong Cloud Momentum
. Forescout Partners with Big Names
. Smartsheet Tapping into the Government Sector
. Salesforce Continues its Shopping Spree
. Palo Alto Networks Targets the IoT Security Market
. DocuSign Focuses on the Mortgage Sector
. Oracle Brags About Autonomous Database
. Blackbaud Acquires YourCause to Grow Addressable Market
. The Market Expects a Lot More from Adobe
. Anaplan Makes its First Acquisition Post IPO
. Activist Investor Drives Market Interest in Box
. MongoDB's Formula for Success
. Coupa Aims for $1B Revenue
. Dropbox on a Rocky Road
. Medallia Banks on Acquisitions
. IBM Banks on AI
. Time For Skepticism with Netflix
. SAP Riding High on the Cloud
. Amazon's Faster Shipping Hurting its Earnings
. ServiceNow CEO Change Signals Focus on Acquisitions
. Will Google Acquire Fitbit?
. HubSpot Focuses on Its Platform
. BlackLine Partners with Google Cloud
. Rapid7’s Focus on Cloud SIEM Pays Off
. Splunk Bets Big on Data Streaming
. Intuit's QBO Scores Big
. VMware Builds Up With Acquisitions
. Palo Alto Targets $5B Revenue by 2022
. Workday Targeting Procure-to-Pay Cycle
. Will Salesforce Acquire DocuSign?
. Okta Targets Enterprise Customers
. MongoDB Eyeing China With Alibaba Partnership
. Twilio Counts on API Upgrades for Growth
. Adobe Revs up its Experience Platform
. Top 20 for 2020
. Anaplan Sees Expanding Use Cases
. Dropbox Gears Up to Regain Lost Valuation
. Forescout Fails to Deliver
. Enterprise Bet Pays Off for SurveyMonkey

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