$BLZE -- love the service, not sure about the stock
I've been using Backblaze's B2 service (which is basically a drop-in replacement of AWS S3) for a month. And I love it. It costs me about 25¢ per month (yes, cents, not dollars) to back up a 100GB home directory, and maintain multiple snapshots for different points in time. The dedication to customer support by the Backblaze team is exemplary. If anyone asks a question on the /r/Backblaze subreddit, they're assured to get an exhaustive reply from a Backblaze staffer. So, as a user, I have nothing bad to say about them.
As an investor, though, I wonder whether the $BLZE mode of operation will continue to gain traction. $BLZE competes against $BOX and $DBX as a pure-play cloud storage provider. As the price for consumer backup services kept dropping towards zero, all three companies have pivoted towards developer/business cloud storage. But $BOX and $DBX have gone a lot further by adding team collaboration, file sharing, and digital workflow support features to their solutions. This has helped both, $BOX especially, to justify higher prices. Amazon AWS, which prices its S3 storage service about 3-4x higher than B2, goes yet further, embedding S3 deeply into its vast array of cloud-based services from web hosting to machine learning. Now, even AWS customers could avoid S3 and pay a lower B2 bill, instead. But does that make sense? I am not an expert on this but to me, it seems like it would add complexity and reduce performance, and I am quite skeptical that many customers would go that route.
From a valuation perspective, $BOX is clearly the most expensive at 5.1x EV/FwdSales. $BLZE is at 1/3 of that, with a 1.7x multiple, and $DBX in the middle at 3.8x. But this seemingly low multiple for $BLZE is contingent on a robust 25.8% median revenue growth forecast for next year. The targets for $BOX and $DBX are lower and seem more achievable. Also, $DBX has been profitable on a GAAP basis for the last 7 quarters, $BOX for 2. $BLZE is behind, having just turned in its biggest quarterly loss in USD terms.
From the technical side, it's interesting to note that there seems to be a significant buyer in the market for $BLZE. For the last week, the price has, again and again, dropped to $5.30, only to find demand there. That seems like a good sign, although the total volume for $BLZE is still quite modest.
So, I'd really love to hear from anyone else about $BLZE, $BOX, or $DBX. To finally address the previous post: I broadly share the sentiment that cloud software as a whole is in a precarious competitive situation. A lot of niches seem to suffer from too many undifferentiated providers competing away the opportunity for positive margins. Cloud communications and cloud application monitoring are two sub-industries where this dynamic seems particularly noticeable. The fact that both $DBX and $BOX have turned the corner to profitability, while still maintaining positive growth tells me that cloud storage might actually enjoy a somewhat more rational competitive state.
Hey. This is Lee. Creator of this website here. :)
My worry about storage is storage is way too cheap these days. As for my use cases storage is tightly coupled with compute. Take this website for example, we have images that we want to deliver to users quickly. And that usually means combinations of S3+Cloudfront+lambda or maybe later Cloudflare R2+workers. But since storage is already quite cheap you need to have good business case to switch over from S3 to anything else, which I think is hard for most companies. On the other hand if you're a storage company switch away from them would be easier the other way around. And once things goes into S3 for a while there's a good chance we're probably not gonna access it again, so it would also be hard for storage service providers to charge on more value adds.
That said $dbx and $blze valuation seems to be trading a reasonable level now. I do believe there might be some long term investing opportunities in those names.
Thanks Lee. Both for the site and the reply :)
My brain completely agrees with you. I am not that close to the technical side of things, so it's very helpful to see my reservations confirmed by someone who is. And I stayed away from $BLZE, so far. But these guys are just so great that I really hope they make it.
I agree. I think a lot of tech companies, maybe even $blze, are trading at a ridiculous low level of valuation while operating on some sort of niche market that has the potential to grow into something much bigger. This reminds me that at the bottom of 2002 even Amazon was trading at about p/s 2 at a point.