As the number of connected devices is only surging, the amount of data being produced is on the rise. Big data companies want to use the massive volume of information to help enterprises gain actionable insights so that they can make more strategic business decisions. Big data refers to massive data sets that are too large or complex to be dealt with using traditional data-processing software.
With Verified Market Research stating that the global big data market is expected to increase from $28.95 billion in 2016 to reach $135.22 billion by 2025, it’s no wonder investors are constantly searching for compelling opportunities within this space. That being said, analysts say that some big data stocks are better positioned for long-term growth than others.
Thanks to the TipRanks Stock Screener, we were able to narrow in on 3 big data stocks that are backed by Wall Street analysts.
Let’s dive in.
Alphabet Inc. (GOOGL)
Google has made a name for itself as more than just a search engine. With shares up 15% year-to-date, analysts believe that the tech giant could see even more gains thanks to its big data and analytics product offerings.
The company’s latest free open-source software tools, released on September 5, focus on differential privacy or the idea of setting a limit on how much you can learn about specific groups of people in big data sets.
“The aim of this is to provide a library of primary algorithms that you could build any type of differential privacy solution on top of,” engineering manager Bryant Gipson said.
Adding to its big data product lineup, the company also recently unveiled its Cloud Storage Connector specifically designed for Hadoop big data workloads. Hadoop describes the collection of open-source tools that enable a cluster of computers to solve problems involving large quantities of data. Management believes that its product will not only cut costs but will also increase efficiency when compared to a traditional Hadoop Distributed File System (HDFS).
GOOGL’s existing big data analytics products, including the data warehouse BigQuery and real-time data processing service Cloud Dataflow, are already hits among customers. Based on its July 25 Q2 earnings release, the Google Cloud segment reached an annual revenue run rate, the measure of how much revenue the business will generate in the next year assuming there aren’t any significant changes, of more than $8 billion. It hopes to further grow Cloud revenue with its $2.6 billion acquisition of data analytics company Looker, which was announced in June.
While GOOGL shares are up year-to-date, Jefferies analyst Brent Thill argues that shares are trading at more than 30% discount to value. As a result, the five-star analyst reiterated his Buy rating and $1,500 price target on September 5. He believes shares could surge 24% over the next twelve months.
All in all, the Street is on the same page. 28 Buy ratings vs 4 Holds received in the last three months add up to a ‘Strong Buy’ analyst consensus. Its $1,404 average price target implies 17% upside potential.
Cloudera Inc. (CLDR)
Cloudera provides enterprises with a scalable, flexible and integrated platform that simplifies the process of managing huge amounts of data. While shares are down 52% since its 2017 IPO, some analysts believe the renewed strength of its big data products will put CLDR back on an upward trajectory.
The company was able to post $196.7 million in revenue for Q2 fiscal 2020, which surpassed management’s guidance of $180 million to $183 million. Management attributed this beat to improved subscription and services performance. While expenses did increase from the year-ago quarter, it takes into account its 2018 merger with cloud-based big data management company Hortonworks.
As a result of this merger, CLDR was able to develop the new Cloud Data Platform. The product is a hybrid-cloud data analytics platform and features its own on-premises data center software as well as Hortonworks’ technologies.
Not to mention Cloudera announced the acquisition of cloud-native and AI-driven analytics company Arcadia Data on September 4. The company expects both the acquisition and the Cloud Data Platform to put CLDR back on track to reach its 20% annualized recurring revenue growth goal.
It is also interesting to note that notorious investor Carl Icahn’s 12.6% stake in the company was revealed last month. More recently, Icahn purchased over $2 million worth of Cloudera shares on September 9.
JMP Securities analyst Patrick Walravens has also just gotten on board. “We see a number of potential catalysts for Cloudera… most importantly, the phased rollout of the new Cloudera Data Platform, the first milestone of which was achieved last week when the public cloud edition was made available to select customers; this should allow Cloudera to begin to participate in the white-hot market for cloud databases, which Gartner estimates reached $10.5B in 2018, up a staggering 87% year-over-year,” he explained. Based on this, the five-star analyst upgraded the rating to a Buy and set a $12 price target on September 5. He sees 37% upside potential for the big data company.
In general, Wall Street is cautiously optimistic about CLDR. It has a ‘Moderate Buy’ analyst consensus and a $10 average price target, indicating 13% upside potential.
Splunk Inc. (SPLK)
It’s no question that the last big data stock on our list has taken a beating recently, with shares down 15% in the last month. That being said, some analysts are telling investors to buy the dip for SPLNK’s substantial upside potential.
Based on the company’s August 21 second quarter earnings release, things are already turning around. Splunk posted an earnings and revenue beat as well as raised its full year guidance thanks to the strength of its cloud business. Management stated that it expects virtually all new software sales to be cloud or term license-based by the end of the year.
The company is making a significant investment in expanding its cloud-based product offerings with its acquisition of SignalFx. The acquisition of the cloud-based software company will cost SPLK about $1 billion and will allow the company to offer a flexible and secure way to process large volumes of data.
“Data fuels the modern business, and the acquisition of SignalFx squarely puts Splunk in position as a leader in monitoring and observability at massive scale,” said CEO Doug Merritt.
This is on top of the unified big data analytics solution it already offers that includes analytics for Hadoop, an ODBC driver to enable connectivity between Splunk and other third-party analytics tools as well as integration with traditional relational databases.
All of this lends itself to Rosenblatt Securities analyst Yun Kim’s conclusion that the dip presents a unique buying opportunity. With that in mind, the five-star analyst initiated coverage with a Buy and set a $150 price target on September 9. The price target reflects his confidence in SPLK’s 37% upside potential.
Wall Street appears to mirror the analyst’s sentiment. SPLK boasts a ‘Strong Buy’ analyst consensus as well as a $154 average price target, suggesting 41% upside from the current share price.