Wedbush's Top Picks in the Observability Tech Field
The term “observability” is being used to describe next-generation approaches to observing and troubleshooting complex distributed systems with high cardinality of its various entities and a high potential for “unknown-unknowns” to affect their operation.
New approaches such as distributed tracing, capturing arbitrarily wide events in context, container monitoring, AI-assisted operations and DevOps processes are gaining ground against legacy approaches (structured log management, server monitoring, on-premise APM) as customers move to modern cloud-based architectures.
Wedbush has picked out some winners in the observability field and indicated what puts them at the top of this list.
Microsoft Corp.’s (NASDAQ: MSFT) Azure Monitor offers observability functionality that includes logs, metrics and tracing. Azure Monitor works in both Azure environments, on-premise and both (hybrid cloud). It offers Azure Monitor for Containers, which monitors performance of container workloads deployed to Kubernetes clusters hosted on AKS (Azure Kubernetes Service). Microsoft also offers Azure Dashboards, Visualizations (metric visualization), Views (log visualization), PowerBI and Alerts. Its tracing capability is facilitated through the Application Insights package, which sends telemetry data to Azure Monitor. Traces generated by Application Insights often have additional contextual information over other vendors.
Wedbush has an Outperform rating with a $160 price target, implying upside of 13% from the most recent closing price of $141.07. Shares of Microsoft traded at $140.53 on Friday, in a 52-week range of $93.96 to $142.37. The consensus price target is $154.53.
Amazon.com Inc. (NASDAQ: AMZN) has a CloudWatch platform that offers observability functionality for AWS, on-premises or both (hybrid cloud). CloudWatch collects metrics, logs and events, and allows for a single unified view of applications, infrastructure, resources and services. CloudWatch has over 70 native integrations with other AWS services (EC2, DynamoDB, S3, ECS [containers], EKS [Kubernetes] and so on), giving it strong infrastructure monitoring and application monitoring capabilities. Separately, AWS offers X-Ray for distributed tracing that functions in apps either in development or in production. Also, CloudWatch Events for serverless can also trigger workflows with services like AWS Lambda, SNS and CloudFormation.
Wedbush has an Outperform rating with a $2,350 price target, implying an upside of 29% from the most recent closing price of $1,821.50. Shares of Amazon traded at $1,811.28, in a 52-week range of $1,307.00 to $2,035.80. The consensus price target is $2,303.14.
The StackDriver platform from Alphabet Inc. (NASDAQ: GOOGL) offers full observability functionality for GCP, AWS and hybrid deployments. StackDriver collects metrics and logs through its AWS and GCP integrations, including GKE (Kubernetes), logging integration and its open source agent for either AWS or GCP hosts. In addition to application monitoring and infrastructure monitoring, StackDriver offers alerting functionality, uptime monitoring and custom dashboarding capability. Separately, Alphabet offers distributed tracing functionality through its StackDriver Trace offering. Stackdriver Trace has language-specific SDKs that can analyze projects on VMs (even those not on GCP), including Java, Node.js, Ruby and Go.
Wedbush rates it as Outperform with a $1,500 price target, implying upside of 21% from the most recent close at $1,238.75. Alphabet traded at $1,235.51 a share. The 52-week range is $977.66 to $1,296.97, and the consensus price target is $1,407.05.
International Business Machines Corp. (NYSE: IBM)’s Cloud App Management/Application Performance Management supplies metrics for applications, but infrastructure monitoring is done by partner CA Technologies. Every IBM cloud server includes standard monitoring with CA Nimsoft (basic version) but can upgrade to the Advanced CA Nimsoft Monitoring solution. IBM works with the OpenTracing API for tracing capability, but it doesn’t have a dedicated offering. IBM’s focus in the DevOps landscape is much more heavily focused on dev than ops.
Wedbush’s Neutral rating comes with a $165 price target, implying upside of 15% from the most recent close at $142.97. IBM traded at $143.31, in a 52-week range of $105.94 to $154.36. The consensus analyst target is $153.05.