The initial public offering (IPO) of Snowflake (SNOW 1.02%) grabbed a lot of attention as the cloud-based big data specialist's S-1 revealed remarkable growth over the last several quarters. In addition, Warren Buffett's conglomerate Berkshire Hathaway and the venture capital arm of may have fueled the excitement as they agreed to participate in the IPO via two concurrent private placements. But the stock valuation is pricing in an awful lot of growth going forward while ignoring intensifying competition.

Instead of considering that risky proposition, investors should have a closer look at Cloudera (CLDR). The market has yet to realize that the legacy data warehouse outfit has recently updated its offerings to address the cloud big data market, too. 

Big data and analytics in the cloud

Over the last several years, enterprises have been using on-premises data warehouse solutions to host, manage, and analyze their growing amount of data and make business decisions. Cloudera was founded in 2008 to address that need with an integrated data platform that leveraged different open-source projects. 

Hand touching cloud icon with lock on it

Image source: Getty Images.

But with the recent explosion of cloud computing, enterprises have been moving some of their infrastructure and applications to the cloud, which makes Cloudera's on-premises offerings less relevant.

In 2012, Snowflake was founded to capture that new opportunity. The company developed a cloud-native and as-a-service data warehouse solution based on public cloud infrastructures.

Snowflake's innovative platform offers significant advantages compared to Cloudera's legacy on-premises products. For instance, customers don't need to install any hardware or software anymore. They pay for what they use, they scale their resources on demand, and they can use the native capabilities of the three major public clouds -- Amazon's Amazon Web Services (AWS), Microsoft's Azure, and Alphabet's Google Cloud -- seamlessly.

Granted, Snowflake doesn't offer any on-premises solution, but growth opportunities remain in the cloud. According to the research outfit IDC, public cloud share for big data and analytics will increase from 25% in 2020 to 50% in 2025. Besides, Snowflake's management estimates that the company's addressable market is $81 billion.

Thus, thanks to its attractive offering, Snowflake posted spectacular results. During the last two fiscal quarters ending on July 31, revenue increased by 133% year over year to $242 million as existing customers spent 58% more than the prior-year period and the number of customers jumped to 3,117 at the end of July, up from 1,547 one year ago.

But given Snowflake's exposure to the high-growth opportunities both cloud and big data represent, the tech stock trades at 174 times trailing 12-month revenue of $402.6 million, which corresponds to phenomenal growth expectations over the long term. That doesn't leave much margin of safety for investors looking to invest in Snowflake.

Cloudera's new hybrid and multi-cloud platform

In contrast with Snowflake's stellar growth, Cloudera increased its last-quarter revenue by only 9% year over year to $214.3 million because of its legacy business. And management expects revenue growth to decrease to 7% during fiscal 2021, ending on Jan. 31. As a result, the market values the company at a much lower price-to-sales ratio of 3.9 compared to Snowflake.

However, the market has yet to realize that the company finalized its new hybrid and multi-cloud solution Cloudera Data Platform (CDP) in August. That means Cloudera now offers a solution, CDP, that runs seamlessly on any combination of public and private clouds.

Granted, revenues from CDP have yet to materialize as the company is migrating its existing customers to the new platform this year, which involves execution risks. Also, as is the case with Snowflake, Cloudera has become dependent on the ambiguous relationship with the three dominant public cloud providers for its public cloud offering as the company both partners and competes with them. 

But the point is, with CDP, Cloudera also now addresses the high-growth opportunities cloud big data represents.

Both companies' cloud offerings still propose differentiating features, though. For instance, Cloudera developed a hybrid solution, while Snowflake's platform can only be used from the public cloud. Another difference is that Cloudera doesn't offer anything similar to Snowflake's data marketplace, which allows customers to market their data to third parties.

In any case, both Cloudera and Snowflake should thrive given their solutions that address attractive growth markets such as cloud, big data, and analytics.

Granted, thanks to its public cloud-only platform and its relatively smaller scale, Snowflake should still grow faster than Cloudera. But investors should realize that, given its much lower relative valuation, Cloudera stock seems to offer more favorable upside potential and downside protection compared to Snowflake stock.