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
2 Billion Users ( > China Population): Why I Am Long on Facebook Stock
But over time, I would like to invest in good businesses at a fair price instead of continuing to invest in an OK business at a cheap price. Due to Facebook’s recent drop in its share price, I took a stake in Facebook during the past few months and right now, it consists of about a quarter of my portfolio.
Part 2 of 2: The Limitations of The Black Scholes Model (by Warren Buffett)
Before we touch on the limitations of Black-Scholes. let’s do a brief recap. In the first part of the article, we talked about how the Black-Scholes model is used to price options. They are commonly known as the options pricing model to know the fair price of the put or call options. There […]
Part 1 of 2: Here’s How to Use The Black-Scholes Model to Price Options
The Black-Scholes model was first developed by three economists. Two of them – Myron Scholes and Robert Merton – received a Nobel prize in 1997 for their work in this model. The Black-Scholes model is also commonly known as the options pricing model. And as the name indicates […]
New Logo Design for Re-ThinkWealth (Value Investing Blog)
The above image is how the new Re-ThinkWealth logo looks like. As you might have noticed, it is a combination of “R” and “W” which stands for Re-ThinkWealth. At the same time, the shape of the logo embodies the resemblance of how a stock market will behave. The stock market goes down and up […]
Here Are My Reflections After 3 Years 7 Months in The Stock Market
So basically, I knew that if I cannot beat the S&P 500 return over the long run, it’s better if I just invest in the S&P 500. While the S&P 500 practices in a huge diversification of 500 big companies listed in the U.S., my U.S. portfolio practices concentration of ideas in which I am most certain about […]
10 Reasons Why We Should Rethink How to Build Our Wealth
I am 25 years old this year and I am always fascinated by how a change in our thinking can result in a huge change in our wealth. I am convinced by the notion that how we think creates the wealth that we have. And writing has been an integral part of it all because it gives me an avenue to pen […]
Here’s My Quick Thought on Starbucks Stock
Starbucks is a company that needs not much introduction. I am sure that most of us have drunk Starbucks coffee before. And many of us have studied or did some work or caught up with a friend there. Starbucks is a familiar company that is in almost every airport around the world. Their story though started back in Seattle […]
Theranos Incident Shows Why It’s Dangerous to Invest Based on Hopes And Dreams
I do admit that a business is nothing without goals, hopes, and dreams. A successful business requires the founder to have a vision and to be able to turn that vision into reality. A successful business is one that has managed to turn hopes and dreams into reality. And by reality, I mean cash. Cold hard cash. Think Apple, […]
Qualcomm Will Not Supply Apple’s 2018 iPhones – And That is Okay (Q3 2018 Results)
Qualcomm is the company that supplies phone makers like Samsung, Xiaomi, Huawei, Apple chips so that their phone can be a “smartphone.” Different chip suppliers will have different chips. And just by having a different chip, the performance of the phone can vary greatly. I am vested in Qualcomm since 24 January 2018 at an average price of about $53. Here are the […]
Thinking of Betting in World Cup 2018 or Investing in Stocks? Read this first.
1. Soccer is very unpredictable – The ball is round. as of 28 of June 2018 in the qualifying round, Germany is out of the world cup. Who could have predicted that? Not UBS and Goldman Sachs, that’s for sure, who predicted Germany would win the cup and go to the final respectively. 2. The more the potential payout, the lesse […]
24/3/2017 Was The First Time I Bought GameStop: About Time a Private Equity Firm is Interested in it!
Because the fact is that today, it is reported by Reuters that GME has received buyout interest and is holding talks with private equity firms about a potential transaction. Seems like Sycamore Partners – one of the PE firms that have expressed interest in GME agrees with my conclusion and analysis that GME is mispriced […]
Sony – Deep Value?
Sony is at an inflection point after years of restructuring. Having shed and restructured loss-making business units, it comfortably exceeded its 2014 medium-term plan to deliver an ROE of 10% and operating profit of JPY500bn in FY17. The company is seeing a number of tailwinds for games, music, and the semiconductor segments […]
