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HubSpot and Upstart - Two Cloud Software Stocks Worth Paying Up For

HubSpot and Upstart are backing up their valuations with eye-catching growth and innovative business models.

Cloud computing might just be the most exciting area of the technology sector at this time.

These interconnected networks of remote internet-hosted servers have a seemingly endless amount of uses and are playing a massive role today in almost every industry, including banking, automotive, financial, healthcare, education and more.

Prior to the pandemic, many companies had been exploring all of the different ways that this innovative approach to accessing computing services can lead to cost savings, productivity boosts and economies of scale.

Then the demand for cloud computing software exploded last year as most major enterprises pivoted toward remote work and hybrid cloud solutions.

It’s hard to imagine these trends going away anytime soon, which means there will be plenty of long-term winners for investors to explore over the next decade.

With the industry expected to grow at a compound annual growth rate of 19.1% from 2021 to 2028 and a variety of exciting new applications for cloud technology including artificial intelligence, augmented reality, telemedicine, and more, these are exciting times for tech investors.

The only issue with investing in cloud software companies is that it can be difficult to justify adding shares of many of the top names given their sky-high multiples.

A lot of these stocks already have rallied considerably throughout the pandemic, which has led to nosebleed valuations that will require consistently astounding growth to justify their current prices.

With that said, there are a few cloud software stocks that are actually worth paying up for even after their big moves higher.

These companies are backing up their valuations with eye-catching growth, innovative business models and solutions that could change the business world forever.

Here are two of the best cloud software stocks worth paying for:

HubSpot

If you are a small or medium-sized business owner that wants to grow your business, it’s extremely difficult to keep things organized and successfully manage your client relationships without the help of a customer relationship management (CRM) software solution.

The only issue is that smaller-sized businesses have long been underserved in the CRM space given that they don’t have the same amount of resources and capital as larger enterprises.

That’s what’s so intriguing about HubSpot  (HUBS ) - Get HubSpot, Inc. Reportsince it's a cloud-based marketing and sales software platform specifically designed to help small- and medium-sized businesses grow.

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The company cleverly has carved out a unique space in the cloud software industry by offering customers a freemium version of its innovative CRM software, then upselling and cross-selling its users with new premium products and features after they discover how useful HubSpot’s platform can be.

It’s easy to support a company that enables entrepreneurship and helps small business owners make their dreams become a reality. HubSpot certainly fits the bill.

What’s also impressive about HubSpot is that the company continues to see accelerating revenue growth and add customers even though digital transformation spending has been lower than in 2020.

With second-quarter revenue of $311 million, up 53% year over year, and thousands of new customers added every quarter, this is truly a standout name in the cloud software space that warrants its valuation.

Upstart Holdings

Upstart is a cloud-based software company that is leveraging artificial intelligence to disrupt the consumer lending industry.

Upstart Holdings  (UPST) - Get Upstart Holdings Inc. Report has developed a proprietary lending platform that benefits both banks and consumers, which is certainly intriguing given the massive addressable market in the industry.

The company’s platform is attractive to banks as it uses sophisticated machine learning models to more accurately identify risk versus traditional credit-score-based lending models.

Upstart claims that its platform leads to 75% fewer defaults with the same amount of approvals as the traditional FICO score model.

For consumers, Upstart is attractive as it provides a quicker and more convenient way to get approved for loans with lower interest rates.

Anyone that has gone through the arduous process of filling out paperwork, negotiating and waiting to be approved for a loan before can understand the appeal of a platform like Upstart.

Note that 99% of Upstart loan applicants receive their money just one business day after accepting their loans and that the company claims to offer 10% lower interest rates on personal loans than traditional lenders.

The stock has been seeing heavy institutional accumulation following Upstart’s knockout second-quarter earnings report that included total revenue of $194 million, up 1,018% year over year.

The fact that this company announced a $575 million convertible senior notes offering earlier this week and is already out to new highs again tells you just how strong the demand is for the shares of this innovative cloud software company’s shares.

Bank-Loan Disruption Boosts Upstart Stock