Since the beginning of the pandemic, businesses of all sizes have focused on digital transformation through the adoption of cloud-based solutions. Although digital solutions have emerged before the pandemic, the blockages and remote lifestyles caused by the pandemic have accelerated the adoption of cloud-based solutions.
Cloud-based solutions are known for reducing operating costs for businesses, providing increased speeds and improving reliability. However, after witnessing solid growth, cloud-based solutions are expected to yield to edge computing. The demand for edge computing is expected to be driven by the growth of IoT and other high-end technologies that require real-time processing and increased reliability.
That’s why today I’m going to look at three of the leading computing stocks: Microsoft Corporation (MSFT), Akamai Technologies, Inc. (AKAM), and International Trade Machinery Corporation (IBM). These stocks look well positioned to take advantage of the industrial back winds.
Edge Computing: The Future of Computing
Edge computing is done at or closer to the data source, with computers smaller than one’s hand. According to Gartner, edge computing is “part of a distributed computing topology in which information processing is located close to the edge – where things and people produce or consume that information.”
The term “edge” refers to a geographical distribution. Instead of relying on the cloud to do all the work in one of the many data centers, edge computing enables data processing within the network, allowing for reduced latency and bandwidth.
The main purpose of edge computing is not to replace the cloud but to provide solutions in places where cloud computing has shortcomings. Edge computing seeks to save bandwidth and improve security, privacy, and reliability.
Edge computing helps bring computing and data storage closer to the devices where it is collected, rather than dependent on a centralized cloud-based location. This improves the performance of an application by eliminating the latency issues involved with real-time data processing. The application of edge computing could benefit the oil and gas industry, autonomous vehicles, patient monitoring, smart city management, cloud gaming and traffic management.
The adoption of edge computing applications is expected to grow as businesses seek to improve their performance by upgrading their security through edge-based threat detection, data minimization, and decentralized infrastructure. The marginal computing market is expected to grow by a 19% CAGR reach $ 87.30 billion by 2026.
Eminent Industrial Participants
Alphabet Inc. (GOOGL) and Amazon.com, Inc. (AMZN) are two main edge computing stocks. While GOOGL returned 13.4% last year, AMZN gained 3.8% last month. GOOGL has a market capitalization of $ 1.70 trillion, while AMZN has a market capitalization of $ 1.57 trillion.
Google Cloud CEO Amol Phadke said in a blog post that new edge services will help customers “reduce latency, lower processing costs by processing data and computing on-edge cycles, reduce costs and processes associated with data storage and eliminate need to transport data from the edge to a central location for real-time computing. “
3 Edge Computing Stocks to Buy Now
Microsoft Corporation (MSFT)
MSFT develops and supports a range of software, services, devices and solutions. The company operates in the Productivity and Business Processes, Intelligent Cloud and Personal Computing.
Analysts expect MSFT’s EPS and revenue for fiscal 2022 to increase 15.9% and 18.4% year-over-year to $ 9.33 and $ 199.06 billion, respectively. It surpassed Street EPS estimates in each of the back four quarters. Over the past year, the stock has gained 11.5% to close the last trading session at $ 285.26.
In terms of gross profit margin of 12 months and net income margin, the 68.83% and 38.50% of MSFT are 37.9% and 577% higher than the industry averages of 49.91% and 5.69%, respectively. Also, its next 12 months EBITDA margin and an elevated FCF margin of 49.12% and 25.14% are higher than the industry averages of 13.78% and 10.06%, respectively.
The strong foundations of MSFT are reflected in its POWR estimates. It has an overall rating of B that equals Purchase in our own rating system. The POWR Estimates are calculated taking into account 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B grade for Stability and Quality. It is ranked number 9 of the 61 shares in the Software – Business industry. Click here to monitor MSFT estimates for Growth, Value and Momentum.
Akamai Technologies, Inc. (AKAM)
AKAM provides solutions to protect and deliver content and business applications over the Internet. The company provides cloud services to deliver, optimize, and secure content and business applications over the Internet. Its products include Kona Site Defender, Bot Manager, Enterprise Application Access, Image & Video Manager, Edge DNS, Enterprise Threat Protector, Identity Cloud, Akamai MFA, Cloud Wrapper, and more.
For fiscal 2023, AKAM’s EPS is expected to increase 11.5% year-over-year to $ 6.60. Its revenue for the quarter ending March 31, 2022, is expected to increase 9% year-over-year to $ 903.88 million. It surpassed consensus EPS estimates in each of the next four quarters. Over the past six months, the stock has gained 15.4% to close the last trading session at $ 118.01.
In terms of gross profit margin of 12 months and net income margin, the 63.34% and 18.83% of AKAM are 26.9% and 231.1% higher than the industry averages of 49.91% and 5.69%, respectively. Also, its back 12-month EBITDA margin and elevated FCF margin of 34.49% and 22.14% are higher than the industry averages of 13.78% and 10.06% respectively.
AKAM’s POWR Ratings reflect solid prospects. The stock has an overall B rating, equal to Buy in our own rating system.
It has a B grade for Growth, Value and Quality. It is ranked number 8 in the same industry. To see AKAM’s other ratings for Momentum, Stability, and Sentiment, Click here.
International Trade Machinery Corporation (IBM)
IBM works in the cloud and cognitive software; global business services; systems; and global financial segments. It also designs advanced semiconductors in partnership with IBM research.
Analysts expect IBM’s EPS and revenue for fiscal 2022 to increase 24% and 5.9% year-on-year to $ 9.83 and $ 60.72 billion, respectively. It surpassed consensus EPS estimates in each of the next four quarters. Its EPS is expected to grow by 16.5% annually over the next five years. Over the past month, the stock has gained 1.9% to close the last trading session at $ 126.37.
In terms of 12-month gross profit margin and net income margin, IBM’s 54.90% and 10.01% are 10% and 76.1% higher than the industry averages of 49.91% and 5.69%, respectively. Also its back 12-month EBITDA margin of 21.25% is higher than the industry average of 13.78%.
IBM’s strong fundamentals are reflected in its POWR Racks. It has an overall rating of B that equals Purchase in our own rating system.
It has a B grade for Value and Quality. It is ranked number 19 out of 82 shares in the Technology – Services industry. Click here to see IBM’s other estimates for Growth, Momentum, Stability, and Sentiment.
MSFT shares traded at $ 282.06 a share on Tuesday afternoon, down $ 3.20 (-1.12%). So far, MSFT has declined -15.96%, compared to a -7.47% increase in the S&P 500 benchmark index over the same period.
About the Author: Dipanjan Banchur
Since he was in high school, Dipanjan was interested in the stock market. This led him to a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More …