We came across a bullish thesis on Backblaze, Inc. (BLZE) on The 10x Radar’s Substack by Aditya. In this article, we will summarize the bulls’ thesis on BLZE. Backblaze, Inc. (BLZE)’s share was trading at $6.39 as of Jan 8th.
Backblaze (BLZE) has positioned itself as a disruptive force in the cloud storage industry, offering a simpler, more transparent, and cost-effective alternative to the complex solutions provided by industry giants such as Amazon, Google, and Microsoft. Through its core products, Computer Backup and B2 Cloud Storage, Backblaze caters to both individual consumers and businesses, delivering reliable data storage solutions at a fraction of the cost of its competitors, with no hidden fees or complexity. The company’s B2 Cloud Storage product, which directly competes with Amazon S3, is particularly notable for providing scalable storage solutions at significantly lower prices. This simplicity, combined with a customer-first approach, has allowed Backblaze to carve out a niche in the cloud storage market, which is poised for substantial growth, with projections pointing to a market size of $118 billion by 2028.
Despite operating in a competitive landscape dominated by much larger players, Backblaze has differentiated itself through its lean model, self-built infrastructure, and open cloud strategy. This positions the company to withstand aggressive pricing pressures from industry giants while maintaining a focus on profitability, even at lower price points. The company also competes with niche players such as Wasabi but has expanded its appeal by forming flexible integrations with partners like Vultr and Fastly, enhancing its interoperability and reach. While Backblaze faces challenges related to customer acquisition and brand awareness, its investments in sales and marketing show promise and suggest the company is on track to expand its market share further.
From a valuation perspective, Backblaze presents a compelling growth opportunity. The company is projected to achieve a 20%+ compound annual growth rate (CAGR), and its conservative fair value estimate based on EV/Revenue and EV/EBITDA multiples suggests more than 200% upside by 2026. With a projected 4x–5x EV/Revenue multiple, the company’s valuation remains significantly undervalued compared to typical SaaS companies, which usually trade at 20-25x multiples. Additionally, Backblaze is targeting an EBITDA margin of 20% by the end of 2025, and 25% by 2026, which strengthens its financial outlook and underscores the company’s path toward increased profitability.
Backblaze’s impressive financial performance since its 2021 IPO highlights its growth potential, particularly within its B2 Cloud Storage segment, which now accounts for 50% of the company’s revenue. With a net revenue retention rate of 128%, Backblaze has proven its ability to not only retain customers but also increase revenue through upselling. The company is on track to achieve adjusted EBITDA margins of 20% by 2025 and anticipates becoming free cash flow positive by the same year. This growth is supported by its low-cost, scalable infrastructure, which includes DIY hardware, allowing Backblaze to provide AWS S3-level performance at a fifth of the price. As demand for cloud storage continues to rise, driven by AI, IoT, and streaming services, Backblaze is well-positioned to capture a larger share of the expanding market.
Furthermore, Backblaze is transitioning from a self-serve model to a more targeted approach, focusing on high-value partnerships and enterprise customers, particularly within the AI space, where storage needs are growing exponentially. This strategic shift is already bearing fruit, with an increasing number of customers now spending over $50,000 annually on Backblaze’s services. The company’s focus on cost-effective, scalable storage solutions offers a compelling alternative to the massive infrastructure investments being made by larger competitors, further solidifying Backblaze’s competitive position.
With its commitment to transparency, affordability, and interoperability, Backblaze is redefining the cloud storage landscape. Its strong financials, customer-centric model, and upmarket strategy make it a compelling investment opportunity, with the potential for more than 200% upside as it continues to capture a larger share of the rapidly expanding cloud storage market.
Backblaze, Inc. (BLZE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held BLZE at the end of the third quarter which was 14 in the previous quarter. While we acknowledge the risk and potential of BLZE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BLZE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.