The Cloud Czars whose cash flow built some of the best cloud computing stocks endured a terrible year. NASDAQ: Apple Microsoft (NASDAQ: AAPL), Alphabet, Microsoft (NASDAQ: Amazon, GOOGL, and GOOG). Com (NYSE: Meta Platforms (NASDAQ: AMZN), and META) lost trillions of dollars in market cap together. Amazon and Meta both lost more than half of their value. Even Apple lost a quarter of its value, dropping below $2 trillion in market cap.
Either the Czars’ own mistakes or the Fed can be blamed. China became Apple’s sole supplier. PC sales caused Microsoft to lose its Windows brand. Gmail and other free services caused Alphabet to lose billions of dollars. With Alexa, Amazon found itself winning a market but not making a profit. While Meta was trying to create a metaverse, the Facebook franchise that it owned failed.
Cloud profits are beyond the Czars’ reach for investors in 2023. NASDAQ: Equinix Companies looking for a home away from expensive cloud services can take advantage of dividend income provided by data center REITs like EQIX) and others. NASDAQ: Palo Alto Networks PANW) and other security companies provide the one essential service for cloud-based businesses.
All of this does not preclude the Czars from returning. Most of them have shares in my name. You can see my favorite for profit in 2023 near the end of this gallery. However, you must always look for the next big thing if you want to make a lot of money in the tech markets.
37 Signals CTO David Hansson recently stated that Equinix (EQIX) spent $3.2 million on Amazon Web Services last year. He left the cloud as a result of the bills. Dell Technologies, which trades on the NASDAQ as DELL) hardware, and savings were promised to follow.
However, you can’t leave the cloud world; you can only leave the cloud. A secure location and cloud connections are still necessary for a data center. That means Equinix (NASDAQ:) should have a great year in 2023. EQIX).
Equinix is a data center-focused Real Estate Investment Trust (REIT). It uses debt to construct these data centers and distributes dividends from profits. Companies like 37 Signals rent the data centers, which have networked connections to major clouds. The same reason that customers rent downtown offices puts servers in the space.
The stock Equinix is not cheap. The dividend yield is currently just 1.7%, and the price-to-earnings ratio is 95 at the moment. However, when capital gains are taken into account, it is a long-term winner, averaging 20% per year for the past five years. Equinix and its rival Digital Realty Trust have consolidated the industry (NYSE: DLR), a different stock to think about.
Palo Alto’s decline over the past year is roughly comparable to that of the S&P 500, at 16%. It was last on the market for $140. That is eight times more than it made last year, and it frequently loses money. However, revenue has doubled since 2020 and increased by 35% annually on average over the past five years.
The cost of leadership is Palo Alto’s biggest issue. Last year, research received approximately one quarter of revenue. New start-ups with novel strategies, breakthroughs, and funding opportunities are constantly announced. Being the King of Security is not easy. To keep your place, you must sprint quickly.
To stay ahead, acquisitions are also necessary, the most recent of which is Cider Security. To handle it all, new infrastructure is needed. Palo Alto’s Prisma Cloud, which aims to stop cyberattacks in the cloud, is well-known. It is also led by Nikesh Arora, who used to be SoftBank’s second-in-command (OTCMKTS: SFTBY). Palo Alto’s rich valuation appears more appealing after experiencing a decline of 18% in December.
Palo Alto and other security stocks will be at the forefront of the tech market revival. Competitors such as Fortinet (NASDAQ: NASDAQ: FTNT), Crowdstrike Splunk (NASDAQ: CRWD), SPLK).
The majority of today’s Internet traffic has not yet been altered by humans. It only appears to managers in online reports as it moves from sensors to servers and back again. It is installed on engines to alert users to maintenance issues before they occur.
All of this is a part of what I call the Machine Internet, a 20-year trend I’ve been studying. In the past, I referred to these technologies as “always on,” and analysts referred to them as the Internet of Things. In order to run factories, hospitals, and entire cities, we are connecting things.
PTC has been in this business since the 1990s, when it was known as Product Lifecycle Management. Rockwell Automation, Inc. (NYSE: PTC has been expanding the portfolio, scoring double ROK’s gains, and ROK), which took a stake of nearly 9% in 2018, has doubled its gains. With sales of almost $2 billion and a market cap of $14.2 billion, the stock has increased by 18% in the past year. 15% of that resulted in net income.
The best growth stories never come cheap, so this stock is still not cheap. One of the major trends of this decade, in my opinion, is the Machine Internet. Additionally, Cadence Design Systems (NASDAQ: CDNS), which is rethinking the manufacturing process of chips for the new world.
GE Healthcare, Inc. GEHC), a company that just emerged from General Electric (NYSE: GE) will assist in the development of these new Internet systems. Along with Siemens, GEHC is already a leader (OTCMKTS: SIEGY), which was responsible for the production of the massive scanners that make up today’s hospitals. Now, these systems are used frequently. A kidney stone cost me my job last year.) There are constantly new developments. Numerous new machines offer numerous opportunities to integrate connectivity.
Like me, GE has been betting for decades on this Industrial Internet without success. GE was way too early, had too little focus, and was way too confident.
It is now prepared to deliver outcomes in the form of hospital savings and GEHC profits. The humility required to move forward has emerged as a result of GE’s breakup. These connections are necessary for the sunk cost of machines and the connections they need to patients and doctors. From there, scheduling the machines to people is just a short process.
Currently, however. The price of GE Healthcare is not that of a growth stock. It is being priced as a value stock with a price-to-earnings ratio of just 15 and a market cap of $29 billion. For the entire year 2022, the business anticipates earning $2.6 billion on $18.3 billion in revenue. Additionally, McKesson (NYSE: MCK), the software company for hospitals, here.
First, the company is not broken because Amazon fell more than any other Czar other than Meta Platforms in 2022. In the reselling of cloud services, Amazon Web Services dominates, contributing nearly $5 billion to net income on $16 billion in revenue just in the third quarter. As streaming develops, its media operations, Freevee and Amazon Prime Video, are expected to dominate. Fire TV and the Kindle book business already dominate their respective markets. In contrast to its streaming rivals, profits will rise.
There are two areas of concern. First and foremost, the store must be run like a store, with a CEO and a logistics expert below them. Walmart is currently beating Amazon’s store (NYSE: WMT), which added in-store pick-up and local delivery in addition to copying the majority of Amazon’s innovations.
Alexa is the second problem. Despite its victory in the voice control competition, Alexa cannot be sold due to its lack of revenue. It can only be used in cars and music. However, Alexa has a sizable user base. It is too massive to kill. With a PE of 87 and these issues, many investors are put off. However, a stock that dominates its markets, including the largest technology market in the world, currently commands a price that is barely two times as high as its revenue.