Cloud stocks have been fantastic investments over the past couple of years. For instance, since MongoDB (NASDAQ:MDB) had its IPO in October of 2017, it has returned 330% to its investors. Another cloud company, Datadog (NASDAQ:DDOG), had its IPO last week. The market has already priced in a lot of future growth for Datadog, awarding the stock a valuation 40 times higher than the company’s revenues. What will the future be like for these software-as-a-service (SaaS) titans…
A Mongo monster
MongoDB is a database company focused on the cloud. One of its competitors, Oracle (NYSE:ORCL), has a $180 billion market cap. In comparison, MongoDB is tiny at $7.4 billion. Oracle’s size shows just how much money is to be made in database software (a lot). And Oracle has dominated this business for many, many years. So that’s the first question a MongoDB investor needs to think about: How can our company compete against Oracle?
The answer lies in the current revolution we are witnessing in database software. There is the old school, dominated by Oracle; its software is based on SQL, or “structured query language.” Oracle’s software is designed for data that’s in spreadsheets and other tables. And now there’s the new form of database software, dominated by MongoDB, called NoSQL. This software is designed for unstructured data — basically any data that is not in a spreadsheet. Imagine how vast that swamp is. Unstructured data includes emails, blog posts, text messages, videos, audio files, satellite images, spreadsheets themselves, and much more.
Oracle has wonderful software for manipulating data — as long as it’s in spreadsheets. If you’re talking about any other form of data, NoSQL is far superior. It should surprise no one that Oracle’s growth has stalled as other forms of data grow more prevalent. Meanwhile, MongoDB’s growth has been spectacular. It had revenue of $99.4 million last quarter, and it’s expanding revenue at 67% a year. But the real star has been Atlas, the company’s database software in the cloud, which is growing by an astounding 240% a year. Almost a third of MongoDB’s revenue now comes from Atlas.
Indeed, the shift to the cloud has been rocking the software industry for a few years now. It’s not just Oracle that is feeling the heat. We’re seeing SaaS revolutions across the entire spectrum of software, including cybersecurity, analytics, tax preparation, sales, and many more. The market has been rewarding cloud companies across the board. And yet some cloud companies (like Mongo) are going after far bigger markets than others.
For instance, Coupa Software (NASDAQ:COUP), a company that provides…
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