Disclaimer: I hold a position in $BLZE. This is not financial advice.

In any investment, the main objective should be avoiding permanent loss of capital. That rule matters even more today, when most assets feel fully priced. I’m constantly looking for companies with solid growth, strong balance sheets, and asymmetric upside.

I think Backblaze ($BLZE) fits that profile.

Backblaze is a cloud-based data backup and storage provider. Think of it as a simpler, cheaper alternative to AWS S3 and iCloud. Before diving deeper, let’s look at the numbers:

• Market Cap: $230M

• TTM Revenue: $142M

• Cash: $50M

• P/S Ratio: 1.6

• Annual Revenue Growth: 20–25%

• Insider Ownership: ~5%

• Retention Rate: ~90%

• Founder-led company

Downside Protection

Backblaze has grown revenue at 20%+ annually for the past three years. Yet it trades at a P/S ratio of just 1.6.

For comparison, similar cloud/software infrastructure companies often trade at 6× sales, sometimes more, even when they are growing at similar rates.

So why is it so cheap? The main reason is size. With a ~$200M market cap and a $4 stock price, Backblaze is simply too small for most institutional investors. Many funds have minimum market cap thresholds or cannot hold stocks priced this low. That means the company is largely ignored by the institutions that drive re-ratings. If Backblaze continues to grow and eventually crosses those thresholds, institutional buying alone could be a meaningful catalyst.

That disconnect is where the downside protection lies.

• Strong recurring revenue model
• 90% retention across both B2 and consumer backup
• $50M in cash providing balance sheet strength
• Nearing profitability

The company is also approaching a key inflection point: profitability. When a growing SaaS business turns profitable for the first time, it’s often seen as a de-risking event by the market. That alone can drive multiple expansion.

Upside

There are two independent levers here: continued revenue growth and multiple expansion.

If Backblaze simply re-rates from 1.6× sales to 6× sales — in line with other infrastructure software businesses — that alone implies roughly 3–4× upside from today’s valuation.

Now add growth.

Backblaze’s B2 cloud storage product is increasingly being adopted by AI companies. B2 is cheaper than AWS S3 and fully S3-compatible, which makes migration friction low. That compatibility matters. It removes switching risk.

The AI data storage market is expanding rapidly. More models, more datasets, more training runs. All require cheap, scalable storage. Backblaze is positioned directly in that flow.

Their B2 segment continues to grow 20%+ annually, proving the demand is real.

Nonfinancial Factors I Like

Backblaze is founder-led. I consistently prefer companies where leadership has real skin in the game. Insider ownership is around 5%. While not massive, it’s meaningful. Most importantly, the product is loved. Go on YouTube and watch independent reviews. Developers consistently highlight:

• Simplicity
• Transparent pricing
• Reliability
• Ease of migration from AWS

The ~90% retention rate backs that up.

Bear Case

The biggest risk is dilution. Since the 2021 IPO, shares outstanding have grown ~80%, largely driven by stock-based compensation. Even if the business performs, shareholder returns get diluted. On top of that, nearly 45% of revenue comes from the consumer backup segment, which has been flat for three consecutive quarters — meaning the headline growth rate is really being carried by B2 alone. Competition is also intensifying: Cloudflare R2 offers zero egress fees and is backed by a $40B+ company, making it a direct and well-funded threat. Finally, overall revenue growth has decelerated from 20%+ to ~14% in FY2025, and a short seller report from Morpheus Research in April 2025 alleged insider dumping and accounting irregularities — claims Backblaze denies, but which contributed to ongoing stock pressure.

Final Thoughts

Backblaze is:

• Growing 20%+ annually
• Trading at 1.6× sales
• Sitting on $50M in cash
• Nearing profitability
• Operating in a structural AI data tailwind

If growth continues and the market re-rates the business closer to software peers, 3–4× upside is achievable without heroic assumptions. Backblaze also fulfils all of my five criteria when investing in a stock.

The key, as always, is limited downside with asymmetric upside.