Piper Sandler analyst reveals his top two cloud stocks

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 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:

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“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.