Cloud Stocks Rose 48% in 2010; Can They Continue Momentum in 2011?
Cloud computing stocks rose nearly 50 percent in 2010, according to the Talkin’ Cloud Stock Index. No doubt, more and more businesses will shift applications to the cloud. But will Wall Street’s love affair with cloud computing companies continue in 2011? On the one hand, TalkinCloud does not offer buy, sell or hold recommendations on cloud stocks. But on the other hand, we certainly realize cloud computing companies can’t deliver 50 percent returns to shareholders every year. In fact, cloud computing stocks have been downright volatile over the past three years.
Let’s start with the good news. Some of the top cloud computing stocks for 2010, according to our Talkin’ Cloud Stock Index, included:
- VMware (VMW), up about 110% in 2010. Doug Smith, senior director of worldwide channels at VMware, insists virtualization is the first step toward the cloud for VARs and channel partners.
- Constant Contact (CTCT), up about 94% in 2010. Based on that lofty performance, some short sellers are now targeting Constant Contact’s stock, reports Boston Business Journal.
- Terremark Worldwide (TMRK), up about 89% in 2010. The company recently landed in Gartner’s Magic Quadrant for cloud infrastructure as a service and web hosting. (But we caution readers: Gartner has a Magic Quadrant for just about every market niche these days, so landing in a Magic Quadrant doesn’t necessarily mean a company is a rare breed.)
- NaviSite Inc. (NAVI) up about 86% in 2010. The company has sold off some businesses (such as a Dallas co-location center) in order to focus on growing cloud and SaaS opportunities.
Still, we caution readers: SaaS and cloud companies have hit bumps on Wall Street before. In 2008, numerous SaaS and cloud stocks fell roughly 40 to 50 percent, according to historic data from Yahoo Finance. The implosion occurred during the U.S. financial credit crunch.
Overall, the cloud computing industry looks far healthier heading into 2011. But lofty stock market returns from 2010 will be difficult to repeat in 2011.