2 ASX 200 shares with exposure to cloud computing

COVID-19 has accelerated the demand for cloud services.
The post 2 ASX 200 shares with exposure to cloud computing appeared first on The Motley Fool Australia. –

COVID-19 has arguably brought forward years of digital change in the way companies do business. According to McKinsey, the restriction of movement due to lockdowns has fast-tracked the adoption of digital platforms by consumers and businesses by five years in just a matter of months.

A report last week from the Australian Bureau of Statistics (ABS) revealed just how far Australian businesses have come with cloud computing. Let’s take a closer look at the rise of cloud computing, as well as a couple of the high-profile S&P/ASX 200 Index (ASX: XJO) shares operating in the space.

Paid cloud computing on the rise

The ABS reported that just over half (55%) of Australian businesses were using paid cloud computing services in 2019-20. This compares to the 42% reported in 2017-18 and 31% between 2015-16.

The report observed that the use of paid cloud computing increased relative to the employment size of the company.

Four in five businesses (81%) with 200 or more employees reported using cloud services. Meanwhile, smaller businesses, such as those employing 0 to 4 persons and 5 to 19 persons reported respective 49% and 65% use of cloud services.

2 ASX 200 shares focused on cloud computing

NextDC Ltd (ASX: NXT)

NextDC delivers data centre solutions that provide businesses with direct access to leading public cloud platforms, such as Amazon Web Services (AWS) and Microsoft Azure, networks and IT services infrastructure.

The accelerated shift to cloud and hybrid cloud services has led to a sharp increase in demand for capacity at NextDC data centres. To meet the uplift in demand, the company has focused on the expansion of existing facility capacity and the construction of new data centres.

These tailwinds could be among the driving forces underpinning NextDC’s upgraded FY21 guidance, in which underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) was forecast to be between $130 million and $133 million (previously $125 million to $130 million).

The NextDC share price has slid by around 9% year to date, broadly consistent with the ~9.35% fall in the S&P/ASX 200 Info Tech (ASX: XIJ). At the time of writing, NextDC shares are trading 2.85% higher at $11.18.

Megaport Ltd (ASX: MP1)

Megaport operates a similar business model to NextDC, providing customers with connectivity to leading cloud, network and managed service providers through its software-defined network (SDN) of over 700 enabled data centres.

In contrast to the NextDC share price and Info Tech Index, the Megaport share price is up by almost 10% year to date. The company’s upbeat third-quarter update on 22 April helped drive its share price up by around 14% within two days from $11.70 to $13.51. Its shares have since drifted higher and are currently fetching $15.63 at the time of writing.

The post 2 ASX 200 shares with exposure to cloud computing appeared first on The Motley Fool Australia.

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Motley Fool contributor Kerry Sun owns shares in NextDC. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Amazon, MEGAPORT FPO, and Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool Australia has recommended Amazon and MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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