Backblaze (NASDAQ: BLZE) went public via IPO last week. Since then, its share price has risen over 60%, proving there's still a great attraction in cloud-based services. But investing in the cloud is no longer new, and some believe the blockchain revolution of Web 3.0 and the metaverse will displace its prominence with a newer, decentralized kid on the block. So, why is the Backblaze IPO proving such a hit?
What does Backblaze do?
Founded in 2007, the Backblaze IPO took place on 11 November 2021. Its shares launched in mid-range at $16. At the time of writing, they've risen over 59% to $25.50.
The company's IPO prospectus revealed it to have over 480,000 customers. These span over 175 countries, protecting business data on approximately 2 exabytes, or 2 trillion megabytes, of data storage under management.
Backblaze is targeting mid-market businesses, which it believes is an unmet segment ripe for the taking. The company sports straightforward pricing and transparent communication, leading it to become a trusted provider. Indeed, going by its reviews, Backblaze customers generally seem very happy with the company's services.
Its subscription-based offerings, such as file backup, account for 72.4% of its business, while consumption-based arrangements, such as B2 services, account for 26.5% of its business.
This B2 Cloud storage is offered on a pay-as-you-go basis that can be dialed up or down as needed. It's provided as a consumption-based Infrastructure-as-a-Service (IaaS) and serves use cases including backups, multi-cloud, application development, and ransomware protection.
The final 1% of its custom is physical media. This refers to securely restoring data using a USB drive (USB Restore) and for migrating large data sets to the Backblaze platform using its proprietary Fireball device.
Backblaze competes directly with big tech players selling subscription cloud-based computer storage and backup services. Its rivals include Amazon (NASDAQ: AMZN), Azure from Microsoft (NASDAQ: MSFT) and Google Cloud from Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).
Is Backblaze stock a good investment?
With its impressive 60% share price rise in recent days, Backblaze gives the impression of a great investment. But is that the case? Let's take a closer look at the numbers.
In 2019, Backblaze achieved close to $41 million in sales. This rose to $54 million in 2020, but operating profits in 2019 turned to a $3.7 million loss last year.
Revenues rose in the first six months of this year, but operating losses also widened, rising to $6.5 million during this period.
Q3 sales are projected to come in around $17 million.
Meanwhile, its price-to-sales ratio is 12, which is very high, and 5.7x the tech industry benchmark. This indicates Backblaze stock could be considered expensive at its current share price.
And as for blockchain and the metaverse disrupting the cloud computing industry? That may well come to pass if decentralization proves to be more secure than centralized offerings. But there's nothing stopping those involved in cloud computing from pivoting to blockchain.
For now, sector sentiment still appears to be bullish on data and cybersecurity offerings; therefore, the case for investing in a company like Backblaze makes sense. But it's highly competitive, and up against some of the biggest and best players in the tech space. So, share price volatility may end up being par for the course.