Big data stocks are those which derive a significant portion of their value from big data itself. Investors hear the term big data thrown around a lot, so it can become confusing. Therefore, it’s best to familiarize oneself with what big data really is when considering investing in related stocks.
With ever increasing computing power we are producing increasing amounts of data from which information can be constructed. In fact, data volumes double every two years.
Not only is there a greater volume of data, but there is also a greater variety thereof with greater velocity. In big data these are known as “the three Vs.” Simply put, there’s more data from more sources, and it’s getting faster.
There are two other Vs that are used to describe the characteristics of big data as well: Value and Veracity. These two Vs point to utility and truthfulness. Yet, investors want to know beyond academic definitions, how is this valuable?
All of this is important for investors for many reasons. Humans benefit from big data at the macro level because we can make better, more-informed decisions. Therefore, increased productivity should follow, and lives should improve. For investors there are a few ways to look at the benefits of big data. Broadly, investors benefit from companies having more, better data. Better data leads to better decisions, leads to price appreciation. All publicly traded companies should benefit from this. However, investors can also seek out the companies which lead this transformation because all data is not equal.
Big data stocks that will win are those that can use data best. Collecting more data is important, but organizing it is also incredibly valuable. Therefore, the firms with the best data scientists stand to benefit the most. Big data firms will rise because today data is capital. But also stocks of companies that have their data best organized and curated will rise.
These big data stocks can grow your portfolio because data is capital today. Let’s take a look at seven companies in particular that stand to benefit from their involvement in this space:
- SAP (NYSE:SAP)
- Splunk (NASDAQ:SPLK)
- MongoDB (NASDAQ:MDB)
- Cloudera (NYSE:CLDR)
- Palantir (NYSE:PLTR)
- Amazon (NASDAQ:AMZN)
- Elastic (NYSE:ESTC)
Big Data Stocks: SAP (SAP)
SAP may seem an odd choice given its recent woes. The German software firm recently backtracked on financial forecasts, leading SAP stock to plummet. In fact, more recently, its shares have gone from $150 to nearly $105 in the span of a week. That large slide was precipitated by SAP reducing its revenue outlook. Yet, SAP only reduced its outlook downward by between 2.16% and 2.46% for the remainder of the year.
This is not to underplay the company’s issues, but rather to suggest that the market reaction may be excessive. SAP certainly represents risk now, but as a contrarian play, and one with lots of big data know-how, it is worthwhile.
SAP’s Predictive Analytics product is a great example of big data utilization. Predictive analytics allow business and individuals to understand data and make educated guesses in a more robust manner. SAP Predictive Analytics is adaptable to individual firm data allowing companies to gain insight into future expectations firm wide.
The company has many analytics products and will bounce back despite current enterprise software concerns.
Splunk touts itself as the “Data-to-Everything” platform. The company also touts the fact that 91 of the Fortune 100 utilize its solutions in their firms.
Splunk’s Enterprise and Cloud solutions integrate machine data to help and create dashboards among other things. Like most big data solutions, Splunk is concerned with turning disparate data sources into usable information via AI and machine learning. Splunk Enterprise allows desktop and mobile visualization of data for users anywhere.
All of this allows businesses to detect anomalies and outliers and generally form a narrative around data. Splunk enables storytelling around data which leads to decisions and action. This characteristic of big data isn’t unique to Splunk, but the company may be doing it better than most. At least analysts seem to believe so: among the analysts covering Splunk, the stock is overwhelmingly rated a buy.
Revenue has risen from $950 million in 2017, to $2.35 billion in 2020. However, EBIT is still negative to the tune of $263 million in 2020. The company is in a growth phase, and if it can make sales and increase EPS, perhaps it will rise as much as analysts predict.
MongoDB is a very young company having only gone public in 2017. In its short life, it has risen from below $30 per share to a current price near $230 per share. Fortunately there is plenty of reason to believe MDB stock can rise higher. That potential makes it one of the stand out big data stocks to consider today.
The company is continuing its winning streak based on its Q2 earnings report released in September.
- Total revenues rose 39% year-over-year, to $138.3 million
- Subscription revenue rose 41% in the same period
- Service revenue rose 11%
It should also be noted that not all is rosy at MongoDB. Losses do continue to mount at the company. Yet, analysts continue to rate it positively and recent worries may make this the opportune time to buy in. The company has proven adept at growing revenues, yet profit growth remains a different story. In fact profit itself remains elusive.
By many such measures the company looks less than promising and yet it continues to be favored. Users favor NoSQL databases for their ease of use and for the fact that they don’t have to learn SQL. MongoDB is one of the most popular NoSQL databases there is today. NoSQL has supplanted relational databases, and for that reason this company is thriving despite its income statement.
Cloudera’s focus is the data cloud for enterprise applications. Its Cloudera DataFlow solution is a big data complete life cycle product. Basically that means it can collect data, curate it, and help users derive actionable insights.
The city of Dubai is using Cloudera’s service and ingested 550 disparate data sets with it. These data sets were used in constructing some of the DubaiNow app’s 115 services. Cloudera’s solutions have been particularly useful in helping the city manage its water supply, a major issue for the desert city.
Like many other big data firms it has seen sales growth but lacks profitability. This is part of the reason that analysts generally favor it as a hold. User adoption despite poor, or even absent profitability is generally true for the big data stocks at large. Because, while users like these products and services, companies like Cloudera do need to find ways to profit from them better.
Palantir recently had its IPO one month ago. So, as a publicly traded entity, it’s about as new as they come. In that span of time the stock has neither jumped up, nor has it declined. The IPO was priced at $9.50 and shares currently trade at $10.13. The company will release Q3 earnings on Nov. 12, which should provide investors more direction.
Last month the company said that it expects revenues of between $278 and $280 million. This would represent a 46% to 47% YoY increase. For the full year, the company is expecting between $1.05 billion and $1.06 billion in revenue, a 41% to 43% YoY increase.
Palantir builds enterprise data platforms and derives about half of its revenue from federal sources. To that end, the company has recently announced a $91 million contract with the Army to develop AI and Machine Learning. The U.S. Army will use Palantir’s Gotham and Foundry projects during the two year project.
Whether PLTR stock ultimately appreciates or not remains to be seen. But it looks like a great company to follow for investors who have an interest in the confluence of defense and big data and an affinity for contrarian companies.
Amazon is a lot of things. The company is a pioneer and the king of ecommerce, it’s a force in the cloud and many other things. It’s certainly a big data leader too.
I’m sure many readers will be able to relate to the feeling that Amazon knows what you’re thinking when you surf its site. And it does in a sense, but ultimately the data it has allows better commerce. Amazon’s use of big data also leads to decreased instances of fraud. The company collects over 2,000 data points on every order to identify fraud before it happens.
The company will continue to face allegations of monopolistic practices. But I don’t think those will bear any fruit despite potential changes in the White House. Any president that punishes Amazon and opens the door for rising Chinese competitor Alibaba (NYSE:BABA) is asking for massive backlash.
Elastic is a big data stock that analysts are fond of currently. That’s due in part to its year-to-date price appreciation: ESTC stock has risen by 53%.
The company itself is a great success story. CEO Shay Banon created it somewhat accidentally while he was writing code and searching for jobs in 2012. In that timespan it has grown to a company with a market capitalization of over $9 billion.
The company’s search solutions are applicable across industry and have helped Pfizer (NYSE:PFE) and the Naval Criminal Investigative Service (NCIS), among others.
Elastic has had little trouble acquiring users like many of its peers. Likewise, sales have risen quickly year-over-year. Unlike other big data stocks though, ESTC stock provided a positive 6 cents in earnings-per-share in Q1 2020.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.