Businesses across industries are transitioning to cloud-based services to enhance operational efficiency and reduce costs. This makes the cloud tech sector primed for outsized growth. Therefore, investors looking for an opportunity to capitalize on the sector’s growth prospects might consider cloud tech stocks CCC Intelligent Solutions Holdings Inc. (CCCS), Twilio Inc. (TWLO), and DocuSign, Inc. (DOCU), which are trading under $100 but possess immense growth prospects.
Analysts are increasingly optimistic about cloud stocks, citing their ability to deliver sustainable returns. Moreover, Trump’s return to administration means more mergers and acquisitions for cloud players. Gartner forecasts worldwide end-user spending on public cloud services to grow 20.4% year-over-year in 2024, amounting to $675.4 billion.
According to Statista, the global software as a service (SaaS) market is anticipated to reach $793.10 billion by 2029, exhibiting a CAGR of 19.3%, further underscoring how the cloud tech sector is set to become more integral to global business operations.
Given this backdrop, let’s take a closer look at the fundamentals of the three Software – SAAS stocks, beginning with the third choice.
Stock #3: CCC Intelligent Solutions Holdings Inc. (CCCS)
CCCS provides a SaaS platform for the property and casualty (P&C) insurance economy. The company’s cloud-based software serves as a service platform connecting trading partners, facilitating commerce, and enabling digital workflow across the platform through artificial intelligence.
On September 4, CCCS launched CCC® Payroll, a new solution designed to streamline payroll management for collision repair shops. This new solution will enable shops to track production and labor within a single system, the CCC ONE® Platform, simplifying the process and enhancing transparency.
On July 30, the company launched CCC® Intelligent Reinspection, a new solution designed to help auto insurers streamline the review of incoming repair facility estimates, expediting repairer workflows and claims resolutions. This new solution will use AI-powered analysis and audit capabilities to assess incoming shop estimates based on insurer-provided rules.
CCCS’ revenues for the third quarter (ended September 30, 2024) increased 7.8% year-over-year to $238.48 million. It reported an adjusted gross profit of $185.93 million, up 8% year-over-year, with a gross profit margin of 77% (up 300 bps).
The company’s adjusted net income came in at $62.58 million and $0.09 per share, up 9.5% and 11.1% year-over-year, respectively. Also, its adjusted EBITDA increased 9.3% year-over-year, amounting to $101.55 million. CCCS’ free cash flow rose 6.4% from the year-ago value to $49.38 million.
As per the business outlook for the fiscal year 2024, CCCS forecasts revenue to be between $941 million and $945 million. The company also expects adjusted EBITDA to range from $394 million to $396 million.
Street expects CCCS’ revenue for the fiscal fourth quarter (ending December 2024) to increase 7.3% year-over-year to $245.23 million. Its EPS for the same period is expected to register an 8.3% growth from the prior year, settling at $0.10. In addition, it surpassed the consensus revenue and EPS in each of the trailing four quarters, which is excellent.
Over the past three years, CCCS’ revenue grew at a CAGR of 11.6%.
Over the past three months, the stock has gained 12%, closing the last trading session at $11.77.
CCCS’ POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
CCCS’ has a B grade for Growth and Stability. It is ranked #9 out of 18 stocks in the A-rated Software – SAAS industry. Click here to see the other CCCS ratings for value, momentum, sentiment, and quality.
Stock #2: Twilio Inc. (TWLO)
TWLO provides a customer engagement platform comprising international communications application programming interfaces. It operates through two segments: Twilio Communications and Twilio Data & Applications.
On October 1, TWLO and OpenAI collaborated to integrate OpenAI’s Realtime API into its platform. This integration will enable TWLO to build conversational AI applications and agents, which will bring customers more natural interactions to the platform.
On September 9, TWLO announced expanded accessibility of Rich Communication Services (RCS) messaging via its Programmable Messaging and Verify APIs to enhance branded and verified messaging and build customer trust in its source.
In the fiscal third quarter that ended on September 30, 2024, TWLO’s revenue increased 9.7% year-over-year to $1.13 billion with a GAAP gross margin of 51% (up 100 bps year-over-year). The company reported non-GAAP income from operations of $182.42 million, indicating a 33.7% increase from the prior-year quarter.
TWLO’s non-GAAP net income came in at $163.92 million, up 53.6% year-over-year, while its non-GAAP net income per share grew 75.9% from the year-ago value to $1.02.
According to the financial guidance for fiscal year 2024, the company’s non-GAAP income from operations is projected to be between $700 million and $710 million, with organic revenue growth anticipated to range from 7.5% to 8%.
The consensus revenue estimate of $1.16 billion for the fiscal fourth quarter (ending December 2024) represents a 7.8% increase year-over-year. The consensus EPS estimate of $1 for the same quarter indicates a 16.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Moreover, TWLO’s revenue has grown at CAGRs of 19.4% and 33.9% over the past three and five years, respectively. In addition, its total assets increased at 14.5% CAGR over the past five years.
Shares of TWLO have surged 59.1% over the past three months and 57.9% over the past nine months to close the last trading session at $96.59.
It’s no surprise that TWLO has an overall rating of B, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Value and Sentiment. Out of 18 stocks in the same A-rated industry, TWLO is ranked #8.
Beyond what is stated above, we’ve also rated TWLO for Momentum, Stability, and Quality. Get all TWLO ratings here.
Stock #1: DocuSign, Inc. (DOCU)
DOCU provides cloud-based electronic signature solutions that enable sending and signing agreements, allowing organizations to do business faster with less risk and at a lower cost. It also offers contract lifecycle management software that automates workflows.
On June 4, DOCU announced the launch of a new connector for SAP Ariba solutions that will help automate workflows between DOCU’s CLM and SAP Ariba, streamlining the source-to-pay process. This launch should enhance DOCU’s market position and firmly establish the company as a leader.
For the second quarter of 2025, which ended on July 31, DOCU’s total revenues increased 7% year-over-year to $736.03 million. Its non-GAAP income from operations stood at $237.16 million, indicating a 39.6% growth from the prior-year quarter.
DOCU’s non-GAAP net income rose 34.3% from the year-ago value to $200.99 million, while its non-GAAP net income per share stood at $0.97, up 34.7% year-over-year. Also, the company’s non-GAAP free cash flow grew by 7.8% from the year-ago value to $197.93 million.
Per the outlook for fiscal year 2025, DOCU expects its total revenue to be between $2.94 billion and $2.95 billion. It forecasts subscription revenue to range from $2.86 billion to $2.88 billion, with billings between $2.99 and $3.03 billion. Additionally, DOCU expects its non-GAAP operating margin to fall in the range of 29% to 29.5%.
Analysts expect DOCU’s revenue for the third quarter ended October 31, 2024, to increase 6.4% year-over-year to $745.32 million, while its EPS for the same period is expected to grow 10.6% from the prior-year quarter to $0.87. The company surpassed street revenue and EPS estimates in each of the trailing four quarters, which is impressive.
DOCU’s revenue has grown at CAGRs of 16.8% and 28.1% over the past three and five years, respectively. Likewise, the company’s levered FCF has increased at a CAGR of 36.9% over the past five years.
DOCU shares have surged 82.4% over the past year and 53.6% over the past nine months to close the last trading session at $79.11.
DOCU’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It also has an A grade for Quality and a B for Growth and Value. Within the Software – SAAS industry, it is ranked #3. Click here to see DOCU’s ratings for Momentum, Stability, and Sentiment.
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DOCU shares were trading at $78.43 per share on Monday morning, down $0.68 (-0.86%). Year-to-date, DOCU has gained 31.93%, versus a 24.45% rise in the benchmark S&P 500 index during the same period.