Cloud Computing Stocks Climb 14 Percent In 1H 2011
The Talkin’ Cloud Stock Index rose 4.02 percent for the week ending July 1, 2011. And overall, the Talkin’ Cloud Stock Index — which tracks 20 cloud computing stocks — was up 13.78 percent for the first half of 2011. Here’s a look at the biggest cloud computing winners and losers so far, and a recap at the volatility we saw in the first half of 2011.
As of July 1, 2011, the biggest year-to-date winners are…
- NetSuite (N, +58.00%): Top-line revenues are growing about 21 percent year over year, and the company has successfully built a channel partner program that includes former Microsoft partners that are shifting customers into the cloud.
- Rackspace Hosting (RAX, +37.44%): Nearly half of the Fortune 100 has adopted Rackspace’s services. Rackspace unified its partner program in early 2011, making it easier for channel partners to cross-sell the company’s hosting services, managed services, cloud services and SaaS applications. Rackspace has also been the subject of occasional takeover rumors be
- RightNow Technologies (RNOW, 33.88%): The company has successfully repositioned from SaaS CRM to a so-called Customer Experience suite. Year-over-year quarterly revenues are growing about 24 percent.
- Taleo Corp. (TLEO, +33.35%): Revenues at the talent-management specialist are growing about 30 percent on a year-over-year basis. The company on July 1 completed its acquisition of Jobpartners, a European provider of talent management solutions, for approximately $38 million (26 million Euros). The acquisition doubles Taleo’s customer base in Europe, Taleo claims.
As of July 1, 2011, the biggest year-to-date losers are…
- ConstantContact (CTCT, -18.59%): On the upside — year-over-year revenues at the email marketing specialist have been growing about 27 percent. But during the first half of 2011, investors seemed concerned about growing competition — especially as small businesses gain more and more alternative social media marketing options.
- Google (GOOG, – 12.28%): The search giant transitioned the CEO post from Eric Schmidt to co-founder co-founder Larry Page — who certainly values channel partners. Back in April 2011 Google said year-over-year quarterly revenues had grown 27 percent. But some investors are worried that Google continues to depend too heavily on paid search revenues. Plus, headcount grew to to 26,316 full-time employees as of March 31, 2011, up from 24,400 full-time employees as of December 31, 2010, Google indicated.
More Volatility Ahead?
No doubt, the Talkin’ Cloud Stock Index was volatile in in the first half of 2011. The index rose nearly 20 percent in the first quarter of the year, then dropped sharply from April through May, before rallying again in late June to finish up the first half with a 13.78 percent gain.
But perhaps most importantly: The vast majority of Talkin’ Cloud Stock Index members are (A) profitable and (B) generating double-digit annual revenue growth. And many of the index members — most notably Google, NetSuite, Rackspace and VMware — have built successful channel partner programs.
Still, cloud stock valuations remain lofty. Rackspace’s P/E (price-to-earnings ratio), for instance, is a sky-high 114.55 — or more than 10 times the P/E ratio of Microsoft, and more than seven times the P/E ratio of Cisco Systems, according to Yahoo Finance.
Translation: Cloud stocks look expensive, and cloud computing companies will need to grow net income rapidly to help justify those lofty P/E ratios. We’ll be back after the market closes on Friday, July 8, with more Talkin’ Cloud Stock Index analysis.