"It's really hard to design products by focus groups. A lot of times, people don't know what they want until you show it to them." That's a famous quote from Steve Jobs, the late co-founder of Apple, and the company's portfolio of innovative products certainly lives up to it.
The iPod (paired with iTunes) changed the music industry forever, and the iPhone completely revolutionized the mobile phone landscape. Apple is now a $2 trillion company, and while the stock remains a great investment, some of the best returns might come from the next generation of innovators.
In this case, I want to focus on cloud computing. According to an estimate by Grand View Research, the industry could triple in value between now and 2030 to $1.5 trillion annually. Any business, large or small, can now serve a global customer base thanks to the online tools delivered in the cloud.
Datadog (DDOG -1.43%) and Snowflake (SNOW -1.61%) have developed unique platforms with the potential to drive cloud technology forward for several years to come. Here's why these stocks of the future are buys today.
1. Datadog is an essential cloud monitoring tool
The cloud allows businesses to do more with less. Hosting a website, managing administrative tasks, accepting payments, and storing data have never been easier or cheaper than they are today, thanks to cloud technology. But building and maintaining a digital presence does come with challenges -- particularly for large, complex organizations.
Datadog is a cloud monitoring service designed to spot technical issues that can sometimes go unnoticed. It helps companies from the cloud migration stage all the way through to running daily operations. When businesses operate physical stores, determining customer satisfaction is relatively easy because there's a face-to-face interaction. But when dealing with thousands of customers online, concerns often show up as lost sales because there isn't a channel for instant support.
Whether it's a retail store, gaming platform, or financial institution, Datadog can identify problem areas as soon as they pop up, allowing companies to implement fixes before customers come into contact with them. A technical bug might be affecting one small subset of users in a specific geographic location, for example, which the business may not know about without a tool like Datadog.
Large organizations in particular are flocking to the platform. In the recent third quarter of 2022 (ended Sept. 30), Datadog had 2,600 customers contributing at least $100,000 in annual recurring revenue, up from 1,800 at the same time last year. The company's revenue is set to top $1.65 billion for the full year, marking an increase of 60% compared to 2021.
The future of the business world is in the cloud, and Datadog will become increasingly essential as that shift continues. With its stock down 66% from it's all-time high, there's no time like the present to buy for the long term.
2. Snowflake streamlines complex cloud operations
Snowflake is a data solution for organizations that have multi-layered cloud operations, especially for those that use several of the leading providers of cloud services, like Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud. The company is known for its incredibly fast growth, and it even has the backing of Warren Buffett's investment company Berkshire Hathaway.
Snowflake's revolutionary Data Cloud allows customers to aggregate data from multiple sources and seamlessly share it across teams, breaking down silos to improve visibility and boost efficiency. It runs on a pay-per-use model, so companies can access all the computing power they need when analyzing mountains of information to draw insights, and can easily scale down in periods of low demand.
The company also hosts a marketplace where customers can buy datasets, or monetize their own data, adding yet another benefit to being part of the Snowflake ecosystem.
The U.S. technology sector had a rough 2022 amid the economic slowdown and, as a result, laid off 159,000 employees. But Snowflake bucked the trend and hired more than 500 new staff during the first three quarters of the year.
It was a necessary move to continue fueling Snowflake's rapid growth. In the third quarter of fiscal 2023 (ended Oct. 31), the company's remaining performance obligations (RPOs) crossed $3 billion for the first time -- a jump of 66% year over year. RPOs are a key metric because they represent Snowflake's pipeline of work, which is eventually expected to convert into revenue in the future.
The company has 7,292 customers, but only 543 of the Forbes Global 2,000 are signed up, so there's still plenty of room for growth. With Snowflake stock down 66% from its all-time high, this might be a great time to buy ahead of the cloud industry's expansion through the rest of this decade.
