It’s expected that by fiscal year 2025, six billion consumers will interact with data every day. Further, “each connected person will have at least one data interaction every 18 seconds.” If we just look at Internet of Things (IoT) devices, it’s expected to create over 90 zettabytes (ZB) of data by FY2025. This is a big enough reason to consider some possible exposure to big data stocks.
Looking further, the International Data Corporation (IDC) estimated that 59ZB of data “will be created, captured, copied and consumed” in FY2020. Estimates suggest that global data storage is projected to exceed 200ZB by FY2025. Clearly, with the growth of 5G and IoT, among others, the amount of data is surging.
This implies strong potential growth for companies that are involved in data storage, management and analytics. This article will discuss seven big data stocks that are worth considering to benefit from positive industry tailwinds.
Let’s take a deeper look into these seven stocks:
- MongoDB (NASDAQ:MDB)
- Cloudera (NYSE:CLDR)
- Elastic (NYSE:ESTC)
- Teradata Corporation (NYSE:TDC)
- New Relic (NYSE:NEWR)
- Datadog (NASDAQ:DDOG)
- Splunk (NASDAQ:SPLK)
Big Data Stocks: MongoDB (MDB)
MDB is among the top big data stocks to consider. The stock touched a high of nearly $429 in February 2021 and has corrected to about $307 as of the time of publication. This seems like a good opportunity for fresh exposure. Analyst estimates point to an average price target of $381.38. This would imply an upside of 24.2% from current levels.
As an overview, MongoDB operates a general-purpose database platform. Currently, the company has 24,800 customers in over 100 countries. The company’s database market is one of the largest in the software industry. Furthermore, it’s expected to increase to $97 billion by FY2023. This presents a big growth opportunity for the company.
For FY2021, the company reported revenue of $590.4 million, which was higher by 40% on a year-over-year basis. For the year, the company has guided for revenue of $755 million (mid-range of guidance). With robust top-line growth, the stock is attractive.
In the fourth quarter of 2021, the company forged a partnership with Tencent’s (OTCMKTS:TCEHY) Tencent Cloud. This would allow “customers to consume MongoDB-as-a-Service across Tencent’s global cloud infrastructure.” During the quarter, the company has also expanded its partnership with Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud.
Through aggressive customer acquisition and partnerships, strong growth is likely to sustain. These factors make MDB stock worth accumulating on corrections.
CLDR stock is another name among big data stocks that has corrected from highs. Currently, the stock trades at $12.50 after touching a high of $19.35 earlier this year. At a forward price-to-earnings (P/E) ratio of 32.9, the stock looks attractive.
Cloudera is an enterprise data cloud company and offers software subscription and public cloud services. In simple words, the company transforms complex data into clear and actionable insights.
For FY2021, the company reported revenue of $869.3 million. An important point to note is that annualized recurring revenue was $778 million. For the year, the company expects recurring revenue of $827 million. With steady growth in top-line and recurring revenue, the company seems well-positioned to deliver robust cash flows.
Going forward, the company’s Cloudera Data Platform (CDP) is a potential growth driver. The company has seen acceleration in the number of customers migrating to CDP. This is also likely to have a positive impact on the company’s annual recurring revenue.
In March 2021, the company announced that Cloudera Data Platform will be available on Google Cloud. The company has already delivered CDP Public Cloud services for Amazon’s (NASDAQ:AMZN) Amazon Web Services and Microsoft’s (NASDAQ:MSFT) Microsoft Azure. The company has also partnered with Nvidia (NASDAQ:NVDA) to accelerate data analytics and artificial intelligence (AI) in the cloud.
ESTC stock has surged higher by 114.5% in the last one-year period. However, it seems that the rally has more legs.
Elastic created Elastic Stack, which the company defines as “a powerful set of software products that ingest and store data from any source and in any format, and perform search, analysis and visualization in milliseconds or less.”
From a growth perspective, the company’s product caters to various industries, segments and geographies. The company believes that in the current year, the total addressable market is $78 billion. Therefore, there is ample headroom for growth. Further, the company’s elastic cloud can be integrated with every major cloud provider.
In terms of growth, Elastic reported 8,100 customers in FY2019. The number of customers increased to 11,300 in FY2020. Also, 47% of the company’s revenue is from outside the United States. With a strong global presence, the company is well-positioned for sustained growth.
Another point that is likely to serve as a long-term growth driver is investment in research and development (R&D). For FY2020, R&D expense was 32.6% of revenue. With focus on proprietary features, the company is likely to have a competitive advantage.
Like most big data companies, subscription revenue for Elastic was 94% of the total revenue in Q3 2021. With robust growth in customers, recurring revenue will continue to grow at a healthy pace.
Teradata Corporation (TDC)
TDC stock has surged by 153% in the last six months. The stock still seems attractive and is likely to trend higher after consolidation.
The company offers Teradata Vantage, which is a data warehouse and analytics platform. In a recent report by Forrester on cloud data warehouses, Teradata was named as a “leader.” According to Forrester, “customers like Teradata Vantage’s hybrid cloud platform, reliability, data science, advanced analytics, and ease of management from an infrastructure perspective.”
It’s worth noting that the company reported revenue of $1.8 billion in FY2020 as compared to $1.9 billion in FY2019. However, two quarters have been better than expected, and that has sparked a rally in the stock.
As the demand for data analytics increases on a sustained basis, the company’s annual recurring revenue (ARR) will swell. For FY2020, the company’s ARR was $1.45 billion.
An important point to note is that the company’s public cloud ARR increased to $106 million, which was higher by 165% on a year-over-year basis. Even for the current year, public cloud ARR growth is guided at 100%. Strong growth in public cloud ARR is likely to be a game changer for the company.
Overall, TDC stock looks undervalued even after the recent upside. Given the market opportunity, the company seems well-positioned for growth revival and cash-flow upside.
New Relic (NEWR)
It might be one of the best times to consider exposure to NEWR stock with the company in a business transformation phase.
The company’s business reorganization involves a consumption-based business model. This will replace the existing traditional subscription model, which is more costly. The company has reported an operating loss for the last two quarters and has guided for loss even for Q4 2021. As the consumption-based model gains growth traction, the losses are likely to reverse.
There are already positive signs for the company. Monthly data indicates that there has been a steady uptick in data growth since the launch of “New Relic.” Product-driven growth is likely to ensure that that data uptick sustains and translates into top-line acceleration. The key data to watch would be free-to-paid conversions. There has been a strong growth in free tier accounts. If conversions are robust, NEWR stock can possibly surge higher.
It’s also worth noting that for Q3 2021, the company reported the best co-selling quarter with Amazon Web Services. In the coming quarters, AWS is likely to remain “a critical part” of product and distribution strategy. This co-selling partnership could be a potential revenue growth trigger.
DDOG stock is among the most attractive names in this list of big data stocks. The stock has surged by 116% in the last one-year period. However, it still remains attractive with the company pursuing aggressive organic and inorganic growth.
For FY2020, Datadog reported revenue of $603.5 million, which was higher by 66% on a year-over-year basis. Furthermore, the company reported operating and free cash flow of $109.1 million and $83.2 million, respectively. As top-line growth sustains, the company is well-positioned to boost its liquidity buffer.
In terms of inorganic growth, the company recently acquired Timber Technologies, which is a maker of an observability data management product. Additionally, the company acquired Sqreen, a SaaS-based security platform. These acquisitions are likely to be a value-add to the company’s offerings and help in accelerating growth.
It’s also worth noting that as of December 2020, the company reported 1,253 customers with ARR of $100,000 or more. With strong year-over-year growth in big clients, the company has clear revenue and cash-flow visibility.
Back in September 2020, Datadog also announced a partnership with Microsoft Azure. With this partnership, Datadog will be available in the Azure console as a first-class service. This is another potential growth trigger for the company. Overall, DDOG stock looks attractive with the company’s healthy top-line growth likely to sustain.
SPLK stock has been an underperformer among big data stocks. After touching 52-week highs of $225.89, the stock has slipped to current levels around $135.
The company has been in a business transformation phase (into a SaaS model). Uncertainties related to growth have been one reason for the stock decline. Furthermore, the company announced the resignation of Chief Technology Officer and Senior Vice President Tim Tully. This has also triggered a decline in the stock. I would not be a buyer at this point. However, SPLK stock is worth keeping on your investment radar.
In terms of positive developments, the company announced in April 2021 that Teresa Carlson has been appointed as the president and chief growth officer. In the past, Teresa has worked with Amazon Web Services and was also a senior executive at Microsoft.
Coming to the financial profile, the company reported revenue of $745 million in Q4 2021. On a year-over-year basis, revenue declined by 6%. This is the third quarter of year-over-year revenue decline and explains the reason behind the stock price trend.
If the company’s business transformation to a SaaS model does pull off a turnaround, SPLK stock will be worth considering. However, for now, it’s a wait-and-watch scenario.
On the date of publication, Faisal Humayun did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modelling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.