The amount of data generated is staggering. According to IDC, about 59 zettabytes of data will be created in 2020 (a zettabyte is 1,000,000,000,000,000,000,000 bytes). And yes, there are a variety of Big Data stocks that have benefited nicely from this megatrend.
As is often said, data is the new oil. It is perhaps the world’s most valuable commodity today.
Data is what can lead to substantial competitive advantages. It’s what makes it possible to use sophisticated AI (Artificial Intelligence) or analytics that can transform a business. Thus, a company like Netflix (NASDAQ:NFLX) can leverage its enormous data to upend the entertainment industry. Or consider how Uber (NYSE:UBER) has been able to completely change transportation.
But working with Big Data is far from easy. This is why there is a great need for sophisticated tools to help provide for storage, management, processing, and mining.
Let’s take a look at seven Big Data stocks that continue to be interesting opportunities right now:
- Elastic (NYSE:ESTC)
- Mongodb (NASDAQ:MDB)
- Alteryx (NYSE:AYX)
- Cloudflare (NYSE:NET)
- Splunk (NASDAQ:SPLK)
- Cloudera (NYSE:CLDR)
- Datadog (NASDAQ:DDOG)\
Big Data Stocks: Elastic (ESTC)
The first on this list of Big Data stocks is Elastic. The origins of Elastic go back to a London apartment in 2012. At the time, Shay Banon was looking for a job. In the meantime, he was spending time writing some applications, such as a search engine for recipes. As he continued with this project, he realized there was lots of potential for it! This would eventually turn into Elasticsearch, which he made open source.
The adoption was strong. But Banon wanted to make the platform more powerful, so he merged with other open source projects. As of now, Elastic is one of the top companies that provides search capabilities for Big Data in the enterprise.
It’s not only fast and comprehensive, but there are strong security and governance systems built in. The system can also work with data from any source, format or environment, whether on-premise or the cloud.
There are currently over 11,300 customers, up from more than 5,000 in 2018. In terms of the revenues, they jumped by 53% in the latest quarter and there were more than 610 customers with annual contract values greater than $100,000 — a clear indication of the strategic importance of the technology.
Mongodb has been one of the hottest Big Data stocks. Since coming public in 2017, the shares of the company have gone from $24 to $225.
But the good times seem far from over MDB stock. The main reason is that the database market is massive and in need of innovation.
For Mongodb, the company started as an open source project, which helped with accelerating its development and growth. The technology was also based on a cutting-edge approach to databases: NoSQL. This involves a document model that allows for working with large amounts of unstructured data. Because of this, Mongodb is a must-have for analytics, AI, and mobile applications.
There are over 18,400 customers across 100 countries and the database has been downloaded more than 110 million times. In terms of growth, the latest quarter saw a 46% increase in revenues to $130.3 million.
Yet the ultimate end-game may be a buyout. Let’s face it, Oracle (NYSE:ORCL) would likely see Mongodb as a way to protect its current database franchise.
Among the Big Data stocks, Alteryx is one of the older ones. The company was founded back in 1997. Despite this, it still very much looks like a scrappy startup.
The core technology for Alteryx is data preparation, which involves the process of cleaning up and restructuring the information. This allows for more robust models.
But over the years – especially as AYX stock has become much more valuable – the company has been bolstering its offerings with acquisitions. There was the deal for ClearStory Data, which provides services for automation of analytics. Then there was the purchase of Feature Labs. This company focuses on feature engineering.
While all this technology is sophisticated, AYX has been smart to make it accessible to non-technical business people. At the heart of this is creating low-code and no-code systems.
In terms of growth, it has been strong. In the latest quarter, revenues jumped by 43% to $108.8 million and cash flows were $20 million. There were also 356 net new customers added, bringing the total to over 6,400.
The market opportunity is also enormous. Based on research from IDC and Gartner, it is about $49 billion.
Pivots are common in the tech startup world. It can be tough to find the magical product-market fit. But for Cloudflare, the company’s vision has remained the same since its founding in September 2010.
It’s all about building infrastructure technology to mange the secular shift from on-premise technologies to the cloud. To do this, the company built a platform that effectively processes large amounts of data from networks. This allows for improved security, intelligent routing, and load balancing. Keep in mind that each of these represent large markets.
A big driver for Big Data stocks like NET stock is its modern technology infrastructure, which is serverless. This means that the company is able to quickly add features to its platform while realizing economies of scale. Consider that the gross margin is roughly 77%, which is fairly high in the cloud world.
Growth has also been robust, at 50%, and there has been much traction in getting large customers. About 13% of the Fortune 1,000 subscribe to the company’s software and 556 customers spend over $100,000 per year.
Splunk is another Big Data stock that has been around for some time. The company was founded in 2003 and became public in April 2012.
Splunk has done a pretty good job at adapting, such as by transitioning to a cloud platform. The company has also been savvy with its M&A strategy.
As of now, Splunk has a system that can ingest enormous amounts of data and provide meaningful insights. Some of the use cases include security, IT monitoring, IoT (Internet-of-Things), and wearables.
All this has powered growth and the value of SPLK stock. Consider that the annual recurring revenue came to $1.775 billion in the latest quarter, up 52% on a year-over-year basis, and cash flows were $46 million. There are over 15,000 customers and 92 of them are on the Fortune 100 list.
“Splunk is doing some really interesting things for their next-generation processing systems,” said Jesse Anderson, who is the managing director of the Big Data Institute. “They’ve announced that it’s going to be based on Apache Flink and Apache Pulsar. These are the best streaming Big Data technologies out there. It will allow Splunk to really pull ahead in a competitive market and process data in real-time.”
Cloudera was launched in 2008 and is one of the pioneers of the Big Data industry. The company’s founders had extensive experience at companies like Yahoo, Facebook (NASDAQ:FB), Oracle, and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG). Cloudera initially built a platform based on the open source data warehouse system, Hadoop.
While growth was initially strong, the company began to stall a couple years ago. For example, in early June 2020, CLDR stock plunged more than 40% on news that its CEO would unexpectedly depart and that revenues would fail to hit the fiscal 2020 forecast.
Despite this, the company has been able to get back on track. During the latest quarter, subscription revenues rose by 21% to $187.1 million. Some of the key drivers have included the transition to the cloud and the development of AI offerings. In the meantime, the company has continued to focus on realizing more efficiencies, such as by focusing on hiring outside the Bay area.
Traditionally software engineering teams have been in silos in their organizations. But this has made it more challenging to develop applications.
However, the founders of Datadog saw this as an opportunity. By leveraging the cloud, they built a platform to provide for collaboration with developers and operations. There was also the use of monitoring and analytics, such as with AI. All this helped to evolve the DevOps trend.
And what about growth? It’s sizzling. In the most recent quarter, revenues spiked by 87% to $131.2 million and operating cash flows came to $24.3 million. There were 960 customers with ARR of $100,000 or more, up 89% on a year-over-year basis.
Of all the big data stocks out there, Datadog is certainly benefiting from secular trends. But the company is also being bolstered because of the impact of the novel coronavirus. According to CEO Olivier Pomel, on the earnings call: “While there is a lot more certainty across the industry and the broader economy in the very near term, we believe it is more important than ever for businesses to operate online, and that the trends of digital transformation and cloud migration remain very much intact over the long-term and may even be accelerated or amplified.”
Tom Taulli (@ttaulli) is an advisor and author of various books and online courses about technology, including Artificial Intelligence Basics, The Robotic Process Automation Handbook and Learn Python Super Fast. He is also the founder of WebIPO, which was one of the first platforms for public offerings during the 1990s. As of this writing, he did not hold a position in any of the aforementioned securities.