Is Snowflake (NYSE: SNOW) Worth Investing? Here Are My 5 Takeaways
17 September 2020
Snowflake does cloud computing that implements a variable pricing model, which can be at times more attractive than fixed packages offered by more prominent competitors.
The market for cloud computing is enormous and expanding.
It is roughly a $55 billion market right now.
Join our free telegram channel here
But is it worth investing? Here Are My 5 Takeaways
1. Warren Buffett (or Berkshire Hathaway) Backs It
Image source: Flickr
Warren Buffett has a piece in Snowflake IPO, dubbed the biggest software offering in history.
Berkshire Hathaway bought $250 million in Snowflake stock in a private placement at an IPO price of $120 per share. They also purchased a further 4 m shares at the IPO price from Snowflake’s previous CEO Robert Muglia.
In total, Berkshire Hathway has a $735 m stake in Snowflake at IPO price.
However, we will not know until a later date if this decision is by Warren Buffett himself or one of his lieutenants, Ted Weschler or Todd Combs – which have discretionary portfolio management of around $14 b each.
It is also interesting to note that Snowflake CEO pursued Berkshire Hathaway as an investor to “raise the stature of Snowflake as a brand” He also said “You could see today that we made a good dent in that. A lot more people know who Snowflake is today.”
Also read: Will The Stock Market Crash One More Time in 2020?
2. Snowflake Share Price More Than Doubled in Their NYSE Debut
Source: Snowflake
Snowflake is also now worth five times it was then in it’s February valuation.
The company originally proposed a price for the IPO in the range of between $75-$85 per share before bumping it up to $120. As of today, it has more than doubled to $253.93 as of the close.
3. They Have 3000+ Customer With 56 $1M+ Customers
Based on Snowflake’s investor relations website, Snowflake currently has over 3000 customers.
56 of them give them greater than $1 million in trailing 12-month product revenue contribution as of July 31, 2020.
Of course, as of today’s data, that is not much revenue and not many customers relative to its valuations.
4. Snowflake Revenues Grew 175% in 2019
In 2019, Snowflake revenue grew from $96.7 m to $264.7 m.
The growth trajectory of their revenue also seems to still be continuing in 2020.
It is evident that the cloud computing market is booming – especially during the COVID-19 pandemic where the whole digitalization process just sped up.
5. Snowflake CEO Has Great Track Record
Source: CNBC
Snowflake’s current CEO is Frank Slootman.
He is a famous veteran in the tech industry known for his successes in selling Data Domain as CEO to EMC for $2.4 b.
And he was also the CEO of Service Now where he increased the revenue from less than $100 m to $1.5 b annually under his helm.
Based on his past track record, he is a wonderful CEO with great foresight and capabilities.
He seems to also be someone with a long-term time horizon too when he mentioned that he wants Snowflake to attract major institutional investors as shareholders—funds or individuals that could buy billion-dollar positions and would likely hold their shares for a long time.
Also read: The Eight Accounting Fraud or Red Flag Signs To Look Out In Stocks
In Conclusion
I believe that Snowflake is run by a great CEO with solid business prospects.
However, even Slootman, an experienced CEO of a public company, says about the stock doubling as “the difference between the frothy, opportunistic retail side of the market place and the long-term shareholders.” and he also said that we should not get too distracted by what we see on CNBC.
Personally, I will only look at Snowflake more in detail when the retail investors are no longer so excited about Snowflake.
Because when everyone is way too excited about something, I think it is a sign that I should not be.
Even if it goes further up, it is okay.
Also read: Is SIA Shares Worth Buying? Here Are My Thoughts (August 2020)
Was this article useful for you?
If it is, would really appreciate it if you could take one minute to share it on Facebook.
Disclaimer:
The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.
Important: Please read our full disclaimer.
Chris Lee Susanto
Founder of the value investing blog Re-ThinkWealth.com (if you type “value investing blog” in Google, his blog is likely the first one). Being a full-time investor himself, Chris knows that he did not beat the S&P 500 return so far (as of the time of this writing) by listening to stock tips. So, when he teaches, he also doesn’t believe in giving stock tips as it is not sustainable for you in the long run. He will teach you how to make your own intelligent decisions with his 4M1S framework. Feel free to also join his free investment telegram channel here.
More from Chris
Sustainability of Dividends
First, we must understand that business conditions are dynamic. Occasionally, different cycles will cause earnings to fluctuate up or down and it affects the business’ ability to pay out dividends. As investor, we must never have the expectations for dividends to remain the same forever […]
The Role of Synergies in M&A; Reliable to Warrant a Premium Over Market Value?
Today, I want to talk about the role of synergies in M&A. And is it reliable enough for companies to pay a premium over market value because of it?
I for one think that this is a very important topic to discuss for both investors and business people alike. Simply because people tend to be over optimistic of the future and […]
Warren Buffett Often Talks About Intrinsic Value: What is it?
Warren Buffett often talks about intrinsic value. But what exactly is an intrinsic value? Knowing what is intrinsic value is the FIRST step for any aspiring investors who want to be a practitioner of value investing. UNDERSTANDING what is intrinsic value is, of course, the second step for aspiring value investors. Because […]
My Thoughts on Qualcomm Q1 2018 Results
Yesterday’s was Qualcomm’s release of its quarter 1 2018 results. You can view its SEC filing here. It is for the quarterly period ended March 25, 2018. A short background, Qualcomm is simply the company behind most of the smartphones that we are using – in terms of the chips or you can call it, the “brain” […]
Good Result and Yet The Stock Fell 10+% – GameStop’s So Unloved
The stock hit fresh near 13 year low despite the company doing pretty well during the earnings call on 28 March 2018. It closes at 10.39% down. It is not an easy day for any GameStop holders (except the short sellers), from my end, I am thinking where I could have gone wrong – or is the market wrong. I am more than willing to […]
Here’s My Thoughts on GameStop’s Q417 Earnings Results (Released 28/3/2018)
Despite the increase in sales and the beat in earnings from analyst estimates, their profits are still down 11.4% year on year basis on the adjusted diluted EPS portion (from $3.77 to $3.34). However, $3.34 is near the top of the management guidance for FY2017 – and the focus on improving the trade awareness where […]
5 Reasons Why Having The Long-Term View is Vital in Stock Investing
Having a long-term view is important in stock investing. And the reason is not just because many of the world’s most successful and richest investors such as Warren Buffett and Seth Klarman say so. “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” – Warren Buffett […]
Is GameStop Doomed? I Visited Their Stores in NY to Find Out
As of the market close on 11 January 2018 at $19.96, I am at a 7.81% paper gain excluding of realized gains I received via dividends and options premium. And GameStop consists of 30.80% of my portfolio – second on the list – with the first being Qualcomm at 40.60% of my portfolio. Naturally, going down to GameStop stores in New […]
Last day of 2017 – A Review of My Investment Journey So Far
This year, the stock market rally would have given many investors with a good profit – the Dow (top 30 company in the united states stock market) up 25%, S&P 500 (top 500 company in the united states stock market) up 19% and Nasdaq are up 28% this year. And I think it is maybe time to be cautious. Or I should say, cautiously […]
Here’s My Opinion on Bitcoin
Bitcoin is a currency that was founded/discovered pretty recently in 2009 by a person (still unknown) using the alias Satoshi Nakamoto.The good thing about transacting using Bitcoin is that there will be no middleman required to do the transacting. There is also no fees tagged to transacting with Bitcoin and no requirements […]
What is moat in Warren Buffett’s terms & why it’s important
Moat is important because it protects a company from losing their market share easily which will erode its earnings power over time. This is important for us as investors because we would want the company we invest in to have its earnings grow over time – then the share price will follow – and not the other way round. So, we […]
GameStop Q3 17 Earnings — Glad Going Against The Crowd Was Right
25% of their stores have already been turned to GameStop plus format which is a 50–50 combination of games and collectibles. What is interesting here is that despite lesser space to put video games, they actually see an increase in video games sales. This got to do with the new types of customers that these […]
