Cloud computing services started to proliferate in the 2010s, and with the tech now accepted as an essential part of business, it's completely disrupting the very fabric of the global economy. Across all industries, those companies making best use of the cloud are winning and leaving their peers in the dust. And in the decade ahead, the trend will remain a high-growth theme with annual spending on the cloud expected to reach $1 trillion worldwide.
Teladoc Health: Don't sweat the 2021 stock performance
The market seems to think Teladoc stock had gotten way ahead of itself after about a 250% run-up from the start of 2020 to mid-February 2021. Since then, Teladoc has been halved in value from its all-time high. I'm fine with that. I was a shareholder of the leading virtual healthcare provider before the pandemic and am happy to continue as one as the global economy gradually adjusts to the "new normal."
Granted, there is ongoing debate about the future viability of Teladoc's business. Telemedicine (visiting with a healthcare professional via phone or video conference) has turned into a staple in the wake of the pandemic, and plenty of competition has entered the fray -- chief among them Amazon's (AMZN -0.77%) virtual healthcare service that started internally for Amazon employees but is now in the early stages of being offered to other employers.
But Teladoc's acquisition of connected health data monitoring firm Livongo last year and a steady rollout of other services (like Teladoc's cloud platform Solo collaborating with Microsoft (MSFT -0.04%) Teams, and the launch of Teladoc's new unified mental health service myStrength Complete) display the large lead the company has over its peers. The full-year 2021 outlook for revenue of no less than $2.0 billion, nearly double the $1.1 billion hauled in last year, also demonstrates digitally connected healthcare is more than just a one-off pandemic-fueled event. Teladoc got in early on a new secular trend that's using connectivity and cloud computing to disrupt the massive healthcare system.
Even after the drubbing it's endured this year, Teladoc stock has more than doubled in value over the last three-year stretch. Now trading for just over 10 times expected full-year 2021 sales, this looks like a long-term value on a proven winner in the healthcare technology space.
Unity Software: A new cloud-based creation platform in the making
Unity was full of surprises when it provided its second-quarter 2021 update. The headline featured a 48% year-over-year increase in revenue to nearly $274 million, far ahead of management's outlook for as much as $245 million provided a few months prior. This prompted an upgrade to full-year 2021 revenue guidance, now expected to be $1.045 billion to $1.06 billion (previously $1 billion to $1.015 billion) -- implying at least 35% growth over 2020.
The company is also flexing its financial muscle and going shopping. It will be using $320 million of its $1.59 billion in cash and equivalents (as of the end of June) to purchase remote work outfit Parsec. As a cloud-based offering, Unity already has built-in capabilities to allow creative content creators to collaborate with each other from afar, but adding Parsec will seriously up the game in this department. Additionally, in July Unity also said it was purchasing small virtual environment creation firm Interactive Data Visualization to help users speed up their development of life-like digital worlds.
Unity is developing new tools in-house too. It recently launched Unity Computer Vision Datasets, aimed at helping users accelerate the training of their own AI software systems. Computer vision (which gives a machine the ability to "see" and interpret what it's looking at) is finding new use cases in industries like manufacturing, retail, and security, building on Unity's core proficiencies as a digital content creation platform and extending its reach in new directions.
Unity took a beating this past spring along with other high-growth tech stocks, but it's back on the rise following the last quarterly results and shares are now down only 28% from all-time highs. With a market cap of $35 billion, this software firm is valued at over 34 times expected 2021 sales -- a steep premium. But given Unity's forecast for average long-term growth of at least 30% a year and its massive profit potential as it partners with a diverse list of businesses throughout the economy, this remains one of my favorite cloud platforms out there.
Twilio: Communications services will never be the same
Like Teladoc and Unity, Twilio shareholders also endured a beat-down this past spring. Though it has rallied in recent months, the stock is still down nearly 20% from all-time highs. But this has been a long-term winner as this operator of cloud-based communications tools continues to disrupt the way the world stays in touch.
Up for grabs are the trillions of dollars spent on telecom, mobile phone, and related services every year around the globe. Thanks to the cloud, there are more ways than ever for consumers to contact companies they do business with, and for companies to build new systems to keep employees connected. Twilio manages a library of tools that embeds everything from chat to voice to video communications into websites and apps. The company reported having over 240,000 customers as of the end of June, compared to 200,000 a year ago. And net dollar-based expansion was 135% in Q2 2021, implying existing customers spent 35% more with Twilio than the year prior.
As a result, Twilio obliterated its own expectations provided a few months ago for sales to be as high as $601 million in Q2. Instead, management said revenue came in at $669 million, up 67% year over year. The outlook for the third quarter implies Twilio's trajectory will remain well over 50% compared to 2020.
This is becoming an incredibly powerful cloud service and is still in the early stages of disrupting the global communications industry. Besides the company's enviable growth rate, it ended June with $5.9 billion in cash and equivalents, offset by debt of only $985 million. At some 24 times full-year 2021 sales, this stock is a long-term value right now as organizations of all kinds migrate their internal communications systems over to the cloud to better address customer needs in the digital-first era.