Tech Plays In The Cloud

The trading session began today with the exciting IPO of Workday $WDAY. The company has been in business since 2006. They basically offer a form of cloud computing for businesses. The IPO price was $28 and the stock opened at $48.05! Is this too expensive? Another Facebook like IPO?

Workday has had year over year revenue growth of 100%, yes 100! The cloud is said to be the next big thing in technology by many experts. Companies Rackspace Hosting $RAX, Salesforce $CRM, and Oracle $ORCL are some of their competition. While the valuation for workday isn't unreasonable compared to Rackspace and Salesforce it is very expensive when compared to Oracle!

Rackspace Hosting $RAX is currently trading at $67.29 which accounts for a P/E ratio of about 62 based on next years earnings.

Salesforce $CRM is trading at $152.77 with a forward P/E of 76.75!

Oracle however is currently trading at a huge discount. It suffered a recent pullback after reporting earnings in-line with analyst estimates a few weeks ago. It's not really clear why the stock has fallen, but I believe it creates a great buying opportunity. Oracle $ORCL is currently trading at $30.98. There forward P/E ratio is just 10.65. This is a large company with very sound fundamentals trading at a massive discount to its peers in the industry. Oracle is also currently the only one of these paying a cash dividend.