Databricks is ushering in a 4th technological, economic revolution in data analytics (Big Data) for greater insights and efficient innovation. But, can you buy stock in Databricks?
Regardless of industry, from farming to manufacturing to banking, data analytics and artificial intelligence are creating leaps in productivity never experienced in human history.
Databricks offers a comprehensive suite of database management applications that are unmatched across any of their business competitors. Let’s take a deeper look into their business model and product offerings.
Databricks offers tremendous company insight on their website.
“With origins in both academia and the open-source community, Databricks has always been devoted to simplifying data, sharing knowledge and pursuing truths.
Founded in 2013 by the original creators of Apache Spark™, Delta Lake and MLflow, Databricks brings together data engineering, science and analytics on an open, unified platform so data teams can collaborate and innovate faster.
More than five thousand organizations worldwide, including Shell, Conde Nast and Regeneron, rely on Databricks as a unified platform for massive-scale data engineering, collaborative data science, full-lifecycle machine learning and business analytics.
Venture-backed and headquartered in San Francisco (with offices on four continents) and hundreds of global partners, including Microsoft, Amazon, Tableau, Informatica, Cap Gemini and Booz Allen Hamilton, Databricks is on a mission to help data teams solve the world’s toughest problems.”
Speaking from personal experience, my girlfriend works in technology/data analytics, and she says Databricks offers the best user experience on the market. End of discussion.
Her firm (Fortune 500) is transitioning all their databases to Databricks because the product is that good. I don’t fully understand the details, but if she tells me it’s good, I believe her!
Data Analytics: The Future?
McKinsey, a global powerhouse in consulting, released a report on the future and value of data analytics moving forward.
“There are five broad ways in which using big data can create value. First, big data can unlock significant value by making information transparent and usable at much higher frequency.
Second, as organizations create and store more transactional data in digital form, they can collect more accurate and detailed performance information on everything from product inventories to sick days, and therefore expose variability and boost performance.
Leading companies are using data collection and analysis to conduct controlled experiments to make better management decisions; others are using data for basic low-frequency forecasting to high-frequency nowcasting to adjust their business levers just in time.
Third, big data allows ever-narrower segmentation of customers and therefore much more precisely tailored products or services.
Fourth, sophisticated analytics can substantially improve decision-making. Finally, big data can be used to improve the development of the next generation of products and services.
For instance, manufacturers are using data obtained from sensors embedded in products to create innovative after-sales service offerings such as proactive maintenance (preventive measures that take place before a failure occurs or is even noticed).”
I studied accounting and finance in college, and during my last few years in school there was a massive trend towards pairing those degrees with an analytics accreditation.
All professionals are going to have to re-tool their skillsets, and Databricks (so I have heard) is the best platform for the future.
Software as a Serivce (SaaS)
Databricks’ business model operates as a “software as a service” subscription for recurring revenue.
I will let the experts from Search Cloud Computing provide a further analysis because it’s far above my technical skillset.
“Software as a service (SaaS) is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet.
SaaS is one of three main categories of cloud computing, alongside infrastructure as a service and platform as a service (IaaS and PaaS).
SaaS is closely related to the application service provider (ASP) and on demand computing software delivery models.
The hosted application management model of SaaS is similar to ASP, where the provider hosts the customer’s software and delivers it to approved end users over the internet.
In the software on demand SaaS model, the provider gives customers network-based access to a single copy of an application that the provider created specifically for SaaS distribution.
The application’s source code is the same for all customers and when new features or functionalities are rolled out, they are rolled out to all customers.
Depending upon the service level agreement (SLA), the customer’s data for each model may be stored locally, in the cloud or both locally and in the cloud.
Organizations can integrate SaaS applications with other software using application programming interfaces (APIs).”
Wealthy Diligence has recently partnered with Audible to provide our readers a 30-day free trial with this exclusive link (no strings attached). Reading has fundamentally changed my life, and I want my followers to have a similar experience.
Databricks Stock IPO
The Databricks IPO date is not set, and there is no immediate indication from the firm’s leadership they plan to go public any time in the near future.
Assuredly, if they need to secure more external financing to fund research and development, payroll, and other working capital, they could issue shares to the public.
However, at the moment, it appears Databricks has been able to secure enough internal financing to avoid diluting their equity rights.
The cost of debt will always be lower than the cost of equity (especially with ZIRP and historically low interest rates).
Ultimately, I would suspect a Databricks stock IPO in the horizon (3-5 years potentially) if they need to scale further operational efficiencies and provide liquidity for initial investors.
Often times, a public IPO is more about providing liquidity for early seed investors who have had their investment locked in a closed-fund for a decade than actually needing financing for growth.
This appeared to be the case with Uber and a lot of other technology-focused IPOs. There’s nothing inherently evil about that approach, and it offers an opportunity for retail investors to access growth.
Databricks Stock Price
Tech Crunch covered the latest round of funding and valuation for Databricks. This provides greater insight into the question, “What would Databricks’ stock price be worth?”
Obviously, no one has a crystal ball, perfectly predicting growth, interest rates, and demand, but we can at least try to make an educated guess.
“Databricks is a SaaS business built on top of a bunch of open-source tools, and apparently it’s been going pretty well on the business side of things.
In fact, the company claims to be one of the fastest growing enterprise cloud companies ever.
Today the company announced a massive $400 million Series F funding round on a hefty $6.2 billion valuation. Today’s funding brings the total raised to almost a $900 million.”
The greatest benefits Databricks has going for them is their operating leverage, scalability, and profitability.
High operating leverage (in laymen’s terms) means the majority of their cost structure is fixed (little variable costs). So, the profit margin for developing one marginal product is essentially 100%.
This enables their business model to scale enormously and make Databricks’ stock enormously profitable if growth can be achieved. I LOVE scalable business models with high operating leverage!
With a $6.2 billion equity valuation (and 300M shares outstanding), the equity price could IPO around $21.
Databricks Stock Alternatives
Databricks has an immense competitive advantage in data analysis and innovation. Nevertheless, what if you want to invest in other technology-driven fields?
Here are a few other names that may pique your interest.
Can You Buy Stock in Databricks?
Sadly no, at the moment Databricks’ stock cannot be purchased by retail investors. A reasonable IPO estimate points toward a $21 share price, but that could change based on valuation and capital structure.
Databricks really intrigues me as an investor looking for growth, in an extremely low-yield global environment. Will it be a homerun or strikeout? Time will provide us an answer, ultimately!
New Article Notifications
Investing outside a bank or a credit union is not FDIC insured. All investments are subject to additional risk, which may cause you to lose your money. All information provided here is for informational and entertainment purposes only.
It is not an offer to buy or sell any of the securities or other products talked about within the scope of this article. Wealthy Diligence makes no claim or guarantee for specific investment rates of return.
Please discuss all investments with a CPA, CFA, CFP, or other professional, and always perform your own due diligence before investing.
I may receive compensation for affiliate links clicked or products purchased.