Cloud, Big Data firms causing ‘big-time disruption’ in IT
March 8, 2014
Grazed from Investors.com. Author: Patrick Seitz.
The tectonic shift in the information technology industry caused by cloud computing is paving the way for a few years of "big-time disruption" among systems and infrastructure software companies, says Canaccord Genuity analyst Richard Davis.
That disruption will create long-term investment opportunities and likely will see the emergence of another company or two the size of Salesforce.com (CRM) and Workday (WDAY), he said in a 31-page report Monday. The report profiled 16 private companies that have implications for investors, including online data storage companies Box and Dropbox and Big Data firms Cloudera and Actian. These companies are potential IPO candidates or acquisition targets, he said…
Public market valuations for tech companies recently have begun to resemble a "big upfront/hope for execution later" paradigm, Davis wrote. That’s created some "Are you kidding me?" valuations like the $19 billion Facebook (FB) is paying for WhatsApp, he said. "We’re in a market in which investors are willing to ‘pre-pay’ in terms of current valuations for the opportunity to be involved in a potentially big story," Davis wrote. "When the future is bright, as it is today, vague assessments of addressable market size and the pace of revenue growth propels stocks prices. Finally, when you have the Fed repressing interest rates for years on end, the value of future growth is higher (because the discount rate is low). Voila, the result is high valuations and investor willingness to ‘prepay’ for growth."…
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