Hortonworks Lands the 2020 Census: What It Means for Investors

Hortonworks (NASDAQ: HDP) is an interesting company for growth investors, as it is very small but nevertheless works with very big enterprises and even bigger amounts of data. The company is one of four leading vendors of Hadoop, the open-sourced Apache software platform that allows businesses to mine and process vast sums of data. The company has partnered with most major enterprise software and cloud vendors such as Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and more recently, inked a strategic partnership with a rejuvenated IBM (NYSE: IBM).

While thrown out of favor last year, Hortonworks stock has found its groove, doubling in price over the past twelve months. After a lot of hype about the Hadoop market and then a subsequent sell-off on fears the market wasn't developing as planned, Hadoop seems to be gaining more and more traction as enterprises look for new ways to mine more of their data, with both Hortonworks and competitor Cloudera (NYSE: CLDR) posting subscription revenue growth over 40%.

Hortonworks lands the next census

The stock is up over 120% this year. A recent jump was caused by the news that Hortonworks landed the contract for the next U.S. census in 2020. JMP securities analyst Greg McDowell predicted the win before it was confirmed in the companies earnings call. McDowell's channel checks indicated Hortonworks may have won an $8.1 million contract from the Department of Commerce. This would be Hortonworks' largest contract to date.

The contract would be a fairly big deal, as Hortonworks made $217 million in the past twelve months, with an average contract of $150,000. So, this deal would account for about 4% of the company's revenue and be over 50 times larger than its average contract. Of course, the amount of storage clusters required to process all the data for the entire United States is bound to be very large.

Brand-boosting initiative

More than the financial impact of the deal, McDowell also notes the adoption of Hortonworks' Data Platform for the census would be a huge vote of confidence for Hadoop technology in general, and Hortonworks specifically. The deal follows on Hortonworks' strategic partnership with IBM, announced in June, where IBM quit selling its own Hadoop distribution, choosing to partner with Hortonworks and cross-sell each others' products instead.

With its deep ties with federal organizations, it's quite possible IBM helped play a role in Hortonworks landing the census, although that is not official. Still, if this small company with unique capabilities has landed "Big Blue" as a partner and "Big Brother" as a client, it's not unthinkable to believe Hortonworks could one day become "big" itself -- right now it is only a $1 billion company.

A compelling upside

Hortonworks remains compelling to me, as it operates in a concentrated industry with only four major players, and seems to be landing big deals such as the IBM collaboration and now the federal government. If Hadoop becomes a necessary tool for business and governments worldwide, shareholders in Hortonworks could benefit handsomely.

10 stocks we like better than HortonworksWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Hortonworks wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 6, 2017

Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Billy Duberstein owns shares of Amazon, Hortonworks, IBM, and Microsoft. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.