This Stock Could Double Earnings in Less Than Two Years

In the time it took you to read this sentence, the Web was simply flooded with new data.

For each second of the day, every human on earth creates 1.7 megabytes of data on average. That’s about seven books worth of information.

Multiply it by the global population of 7.8 billion, and you have 54.6 billion entire books worth of data added to the internet every second of every day.

That’s just a small look at how totally mind-boggling the amount of voice, data, streaming videos, music and more moving through the Internet at any point in time is.

Research firm IDC estimates that 59 petabytes of data were made and consumed in 2020.

For reference, 59 petabytes of 4K movies would take 147.5 years of non-stop binging to watch.

We’re surrounded by these data generators: Smartwatches, fitness bands, smartphones, smart speakers, laptops, gaming consoles, security cameras…

The Data Universe

In a moment, I’ll show you why that’s barely scratching the surface.

This is why we focus so heavily on the lucrative aspects of cloud computing. According to MarketsandMarkets, Big Data will be worth an astonishing $229.4 billion by 2025.

And I’ve identified a firm that is a play on the cloud with a heavy emphasis on data. It recently reported a stunning 400% earnings surprise.

Today I’m going to show you why there’s still so much upside ahead…

Now then, I think this area is so important that I told you back in our January tech forecast that the cloud would be a big economic driver this year.

You may recall me mentioning then that at the height of the pandemic, we saw more than 300 million video chats happening every day.

In 2020, millions of people started working from home, pushing large parts of what used to be done in person or on paper onto the Internet.

And with Global Workplace Analytics saying some 30% of the workforce will continue to work from home even after getting a vaccine, this tidal wave of new data isn’t about to just disappear this year

Then again, as I noted a moment ago, the amount of data being created and used keeps growing.

Take social media, for example. Every minute of every day, 300 hours of new video content gets uploaded to YouTube. On Facebook, users send 31 million messages and view 2.7 million videos every minute.

Every minute!

Closer to home, the same is true of our watches, for example. In just a few short years, they’ve gone from showing only the time to also our location, how far we’ve traveled, whether we walked or ran, exactly how many steps we took.

Some smartwatches can even keep track of our heart rate, analyzing that for any anomalies, and even monitoring blood oxygen levels.

This data is all stored minute-to-minute, if not second-to-second. And it all has to be packaged up, sent to the cloud, and analyzed.

So, a company that is a pure-play on data moving through the cloud is in the pole position.

The Big Dog

That’s what’s got me so excited about Datadog Inc. (DDOG), a cloud-management developer for businesses.

The firm’s single cloud platform integrates all the metrics that an operations team uses to monitor their cloud applications and servers, as well as the logs they use to troubleshoot where an error comes from.

One of the things that gives Datadog a leg up on the competition is that the firm’s platform also integrates the “traces” the development team needs to see to determine how to fix an error once it’s spotted.

Because the performance metrics, logs, and traces are all shown on one cloud-based dashboard, both the operations and development teams see exactly the same information and use the same language.

So, when the operations team notices a slowdown or error, they can immediately see if it’s because of a hardware issue, while the development team can see if their code needs fixing.

This merging of development and operations into “devops” is a huge boon to companies running cloud services, and allows teams to constantly optimize speed and performance without getting into the blame-games or territorial fights that can plague traditional cloud development.

Datadog even offers built-in machine learning to predict potential problems before they happen, as well as built-in marketing and business analysis, so that the devops team can optimize products with revenue in mind from the get-go.

With 40 million new remote workers in America alone, all suddenly relying on cloud services, you can see how crucial this kind of shared information is.

Datadog has certainly made the most out of the work-from-home trend. In the firm’s latest quarterly earnings, revenue surged by 61% to $155 million.

The firm continues to emphasize working with small and mid-sized businesses, a part of the cloud-monitoring market that most competitors overlook in favor of larger corporations.

That puts Datadog in a great position to build long-term relationships that will fuel growth for years to come.

Even so, Datadog isn’t resting on its laurels.

This is a growth firm that’s plowing cash into expansion, increasing the number of high-paying customers by more than 52% year over year, even as the firm reported a 400% earnings beat for last year’s third quarter.

On a non-GAAP basis, a great way to measure a growth firm, per-share profits came in at 5 cents compared with break-even earnings in the year before.

The company reports fourth-quarter profits in a few days. If it misses forecasts, we could see a selloff. But don’t worry, I view that as a buying opportunity to build a position over the long haul. [update from DTA: the company reported on Feb 11 and shares have since pulled back. This could be a buying opportunity.]

Now, a 400% beat is a bit much to expect year after year, even for a company like Datadog.

So, let’s be conservative, and forecast annual earnings growth of 40%.

Even at that conservative rate, the firm should still double its earnings in under two years.

As you can see, with Datadog you can make sure your wealth grows in step with the world’s data explosion.

Cheers and good investing,

— Michael A. Robinson

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Source: Strategic Tech Investor