The Global X Cloud Computing ETF is down 30% versus early November, which means opportunity to buy quality cloud names on sale, says Piper Sandler’s Brent Bracelin.
Bracelin’s bull case for Bill.com Holdings
Bracelin agrees that tough comps could see consumer-oriented cloud stocks struggle in the near term but sees opportunity on the enterprise side. One of his top enterprise cloud names is Bill.com Holdings Inc (NYSE: BILL). On CNBC’s “TechCheck”, he said:
“70% of its revenue is tied to a small take rate. Every time a small business pays its bills, Bill.com gets paid. Additionally, with every 100 basis points increase in the Fed funds rate, it gets $30-$35 million in incremental revenue. It’s one of the few cloud names that benefit from a rising rate environment.”
Earlier this month, Bill.com reported a massive 190% year-over-year growth in its quarterly revenue. The U.S. firm also broke even on a per-share basis in Q2. The stock is down 30% from its November high.
Bracelin also liked Procore Technologies
Another B2B cloud stock that he’s bullish on is Procore Technologies Inc (NYSE: PCOR) that last week found a spot on G2’s 2022 Best Software Awards. The stock has lost over 35% in less than four months.
They do construction software. This is a business that also has majority of its revenue as a take rate. But instead of recognizing the revenue when you buy that sweater online, they’re recognizing their revenue over a five-year period that it takes to build a $100 billion building. We like these business models that are part software, part take rate.
According to the Piper Sandler analyst, the cloud space will be valued at $1.80 trillion by the end of this decade. The sub-sector now has 105 stocks versus 70 a year ago.
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