- Cloud stocks sold off earlier this year as investors worried about inflation and rising interest rates.
- They're now regaining some ground, after strong quarterly results and optimistic full-year forecasts.
- "We haven't seen the fundamentals of that basket of businesses really fall off a cliff," said Elliott Robinson, a partner at Bessemer Venture Partners.
Confluent Co-Founder and CEO Jay Kreps appears at the company's sales kickoff in Las Vegas on Feb. 8, 2022.Confluent
Investors looking to get into beaten-down cloud stocks at bargain basement prices may have missed their opportunity.
Scanning the cloud software market, which tanked to start the year, numerous stocks have jumped 50% from their lows. The WisdomTree Cloud Computing Fund, a sector-wide basket, has risen 26% in the past three months, while the S&P 500 is up less than 9% over that stretch. The cloud index is still badly underperforming the broader market for the year.
The macro data remains unfavorable for cloud companies, which ran up during the pandemic when interest rates were low and investors were paying big premiums for growth. Now, with the Fed in the midst of a hike cycle and inflation near a 40-year high, profits are at a premium as are dividends and products that consumers need in good times and bad.
