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Tech stocks have been the superstars of the market in 2020.
However, the stars have dimmed a bit in the past week or so. We've seen tech stocks falter and drive the broader market to large one-day losses.
Despite the short-term uncertainty, technology will always drive the economy, especially Big Data and the cloud.
Two of the leading cloud and data management stocks appear to have incredible long-term opportunities. Both have already had huge gains in 2020, but the outlook shows massive gains for the years ahead as well.
Today, we're looking for the better buy: Snowflake Inc. (NASDAQ: SNOW) or Fastly Inc. (NASDAQ: FAST).
The Case for Snowflake Stock
Snowflake is all over the news in recent weeks.
Its recent IPO was the largest ever for a software company. To make this data management company even more intriguing, it's the first technology IPO Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) has ever purchased.
Shares of Snowflake doubled on the day of the IPO. They have fallen slightly since, but it is still a gain of almost 100% for Warren and the others who got shares in the offering.
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Snowflake offers what it calls the Data Cloud to its customers. Its platform allows its customers to squeeze the fullest potential out of their data, all using cloud architecture instead of physical hardware.
Snowflake users have a powerful competitive advantage in what is increasingly becoming a data-driven world.
In the IPO filing, Snowflake said it believes the total addressable market for its data products would reach $84 billion by the end of 2023.
Management indicated that it believes data will become one of the most critical factors of business success. It said that data is "becoming paramount to business success" and is "at the heart of business innovation."
Recognizing this trend, organizations everywhere are seeking ways to transform their businesses by capturing, analyzing, and mobilizing data.
This is a high-growth stock and should continue to be one for years. Revenue growth has been explosive, with sales going from $96.6 million in 2019 to over $240 million in the first six months of 2020.
Does it have a formidable competitor in this other cloud company?
The Case for Fastly
Fastly is another fast-growing cloud-based company that has seen explosive growth in both business and its stock price this year.
Fastly makes software that allows users to speed up their applications, videos, and websites. Some of the most popular tech and social media companies use Fastly products to manage their websites.
These include Pinterest Inc. (NASDAQ: PINS), Etsy Inc. (NASDAQ: ETSY), Shopify Inc. (NASDAQ: SHOP), Spotify Technology SA (NASDAQ: SPOT), and Slack Technologies Inc. (NASDAQ: WORK).
Chinese social media superstar app TikTok is also a big customer, and until Monday, that was looking like a massive problem for Fastly. The Trump administration talked of banning that site from the United States due to data and privacy concerns.
On Monday, the administration approved a deal where TikToks' parent company, ByteDance, sold a stake to Oracle Corp. (NYSE: ORCL) and Walmart Inc. (NYSE: WMT). This will allow TikTok to continue growing its user base in the United States and to continue paying Fastly a lot of money every month.
Fastly is another long-term, high-growth story that could drive massive long-term gains. The analyst consensus for earnings growth for the next five years is 30% annually, and many observers outside of Wall Street think that could be too low.
Now, here's the stock you're better off buying...
Is Snowflake or Fastly the Better Buy?
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.