The amount of data produced in the world is staggering. According to Statista, by 2025, global annual data production, capture, duplication, and consumption is anticipated to nearly double from today. With so much data being generated in the world, many businesses help maintain, track, and analyze it.
Three businesses, in particular, that work with data might provide investors with extremely high returns over time. Here's why Snowflake (NYSE: SNOW), Confluent (NASDAQ: CFLT), and Datadog (NASDAQ: DDOG) are all growing tech stocks to buy and hold for the next two decades.
Snowflake (NYSE: SNOW)
Almost every aspect of a business is represented in data. With an ever-increasing cloud-based presence, the amount of data generated by software and other sources will continue to rise, and businesses will want to evaluate it at some point. However, not all data generated today will be useful to businesses when it is initially produced. This data will need to be stored by businesses in order for them to use it later on, which is where Snowflake is helpful.
The Snowflake data warehouse is a cloud-based solution that enables organizations to store data and analyze it in the future. Organizations only pay for data storage if they want to retrieve and examine it. Customers find it simple to join up with Snowflake, but difficult to depart.
The firm's quarterly earnings of $333.5 million in the third quarter of fiscal 2022 (ending October 31, 2021) was up 110 percent year over year. With businesses generating more data every day, future analysis, queries, and revenue should be expected. The firm already receives roughly 1.3 million queries each day. With more data to analyze in the future, businesses will almost certainly end up paying more frequently. This may already be observed in Snowflake's net retention rate, which is 173%.
This company is not cheap at 86 times sales. Despite a decrease of 50% to 43 times sales, the stock price might still be considered pricey, so prospective investors should plan for some volatility over the next several years. However, its business model enables for significant usage-based growth in the next several decades, and as organizations acquire more data and seek to comprehend it better, Snowflake stock may reap significant benefits. Snowflake is a major name in the data storage sector, having become popular among Fortune 500 firms. Snowflake stock may benefit from this fame by increasing rapidly over the next 20 years.
Confluent (NASDAQ: CFLT)
Even if Snowflake obtains all of their data, many organizations must analyze it in real time. For example, if you're a bank transferring data across borders and need to detect fraud as soon as possible rather than the next morning, Confluent can assist. It organizes data from a variety of sources into one data stream, which it processes in real time with open-source software called Apache Kafka.
Apache Kafka is an incredibly powerful data analysis platform that 80% of the Fortune 100 employ in some capacity, but it's difficult to scale and integrate into a company. Confluent serves as a source of expertise by integrating Kafka into an entire organization and handling the challenging elements that in-house personnel are unable to handle. Given the importance of Kafka, Confluent has seen significant uptake from businesses of all sizes: 664 enterprises spent over $100,000 with Confluent during the third quarter of 2021 (ending Sept. 30), contributing to revenue growth of 67% year over year to $103 million.
Today's leader in managed Kafka solutions is Confluent, which is also aided by the company's personnel. The creators of Kafka are also the founders of Confluent, so no one understands how Apache Kafka works like Confluent's creators. This gives them a distinct competitive advantage over other managed Kafka services. Similar to Snowflake, the firm has a sky-high valuation of 41 times sales. However, with a market addressable of approximately $91 billion expected to nearly double by 2024, Confluent stock is likely worth the higher price.
Datadog (NASDAQ: DDOG)
If a firm wants to get access to all of this data and analyze it in real time, it must keep track of its software to ensure it is running and working properly. Companies must ensure that their infrastructure, applications, and other systems are functioning correctly and securely. Datadog is the ideal platform for assisting businesses in achieving this goal.
Datadog has a variety of software solutions and integrations that allow it to serve as the one-stop shop for everything a company may need to monitor and optimize its cloud presence, allowing the firm to develop at an exceptional rate. In its fiscal 2021 third-quarter earnings, management stated that 31% of the company's clients are employing four or more of its software solutions or services, which was up from 20% in the year-ago period. This is a great example of how Datadog's land-and-expand marketing approach has paid off. With the introduction of 10 new products and integrations at its most recent user conference, this method might continue to develop.
All three firms are currently losing money, but that is because they are all investing a lot to enhance their businesses and eventually benefit from the significant growth in data and their respective industries over the next decade. For example, Datadog stock posted a $5.5 million loss in the third quarter. The deficit is declining each year as Datadog has established itself as the leader in the market and offers a product that may allow it to continue its rapid expansion for many years.