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One of the core themes behind the years remarkable run-up in technology shares is the accelerated adoption of cloud-based computing servicesalmost all of them stemming from the power and flexibility built by the leading public cloud operators, Amazon.com, Microsoft and Alphabet.

Mizuho Securities analyst James Lee asserts in a new research note that new contract activity for cloud computing has recovered to 85% of pre-Covid levels, and should accelerate into the years second half.

Enterprises are becoming more urgent on cloud migration, with emphasis on database management, cybersecurity and automation, Lee writes. Demand increased from core verticals such as financial services and retail. The biggest surprise was health care, which has been lagging in cloud computing, but Covid-19 accelerated adoption due to telemedicine and digitizing patient data.

Lee repeats his Buy ratings on both Amazon (ticker: AMZN) and Alphabet (GOOGL), lifting his target price to $3,450 from $3,100 for Amazon, and to $1,650 from $1,560 for Alphabet.

We believe that higher utilization for data migration to the cloud and database management applications is favorable for Amazon Web Services as it has the largest infrastructure service, the most advanced technology, and a comprehensive ecosystem for native database management, he writes.

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And he says that increased demand from the retail sector is modestly positive for Alphabets Google Cloud Platform.

For retail, the goal of investment in the cloud is to transform the retail environment by digitizing inventory and automating payments in order to compete with e-commerce pure plays, he writes. For health care, which has been lagging in cloud adoption, we believe it reached an inflection point recently as hospitals are migrating to cloud due to increased demand for telemedicine, [customer relationship management] and patient database management.

Amid a broad rally in tech shares, Amazon was up 1.3%, to $3,242.90 Monday afternoon and Alphabet was up 0.9%, to $1,553. Microsoft (MSFT) slipped 0.2% to $213.16, while the Nasdaq Composite Index added 0.7% and the Dow Jones Industrial Average gained 1.7%.

Write to Eric J. Savitz at eric.savitz@barrons.com

The rest is here:

Buy Alphabet and Amazon Stock, Analyst Says. Your Head Should Be in the Cloud. - Barron's