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Google (GOOGL), Amazon (AMZN), and Microsoft (MSFT) all have one thing in common: they are tech giants in the field of cloud services
In this analysis, I’ll be analyzing the fundamentals of Snowflake (SNOW), a startup that is about to challenge the Big 3 very soon.
About Snowflake
-Snowflake submitted their IPO documents to the SEC in August 24
- Snowflake is currently the fastest growing startup in the cloud industry
- The company consists of ex-developers from Oracle (ORCL)
- Founded in 2012, the company currently has about 1400 employees.
Company Valuation
- The company was valued at $12.4 billion in February 2020
- One thing to note from this company’s valuation is how it skyrocketed throughout time:
- In January of 2018, the company was valued at $1.5 billion
- By October 2018, the company’s valuation popped to a whopping $3.5 billion market cap
Investors
- Its main VC investors include: Sequoia Capital, Altimeter Capital, ICONIQ Capital, Capital One Growth Ventures, and Shutter Hill
- Venture Capitals have collectively invested $1.4 billion into the company so far.
- The fact that Warren Buffet is willing to bet big on this company’s IPO also acts as bullish stimulant, especially knowing that Buffet is famous for his dislike towards tech stocks.
Financials
- Snowflake shows stunning revenue growth
- Their 2020 Q2 revenue hit a staggering target of $133 million, demonstrating a 121% year on year growth
- Compared to their counterpart Datadog (DDOG), whose Q2 revenue showed a 68% yoy growth, it could be said that Snowflake’s revenue growth is massive
- While their financials are still at a net loss, their losses for the first half of the year was at $171.3 million, which is a $6 mil reduction compared to that of last year
Business Model
- Snowflake has been building a data warehouse since 2014
- They offered a virtual data lake between cloud suppliers and a company’s program/application
- This allows clients to easily approach massive amounts of data quickly
- With the shift from on-premise to cloud services, more and more companies enter the cloud service industry as clients
- Snowflake is also attempting to make a transition from a warehouse to a platform.
- This is because Snowflake is available for use in Amazon, Google, and Microsoft’s public cloud in 22 countries.
- Essentially, it acts as a platform that connects different cloud services, making the access and transfer of data from one cloud to another easy
- Through Snowflake’s platform, the operation of a data cloud is possible.
- This essentially means that the conventional on-premise, infra clouds, and app clouds can have access to, share, and extract data without any barriers
- As such, one of the greatest value their business model offers is the network effect through the interoperability of different cloud services
Conclusion
While the cloud service industry continues to be highly competitive among Amazon, Microsoft, and Google, Snowflake offers values that could easily enlarge the pie. Its solid business model offers potential to make net profits once they start cutting their massive marketing costs. Anyone who is bullish on the outlook for the cloud servicing industry should definitely have his eyes on this stock.
I would also appreciate it if you could leave a comment below with some original insight.
Google (GOOGL), Amazon (AMZN), and Microsoft (MSFT) all have one thing in common: they are tech giants in the field of cloud services
In this analysis, I’ll be analyzing the fundamentals of Snowflake (SNOW), a startup that is about to challenge the Big 3 very soon.
About Snowflake
-Snowflake submitted their IPO documents to the SEC in August 24
- Snowflake is currently the fastest growing startup in the cloud industry
- The company consists of ex-developers from Oracle (ORCL)
- Founded in 2012, the company currently has about 1400 employees.
Company Valuation
- The company was valued at $12.4 billion in February 2020
- One thing to note from this company’s valuation is how it skyrocketed throughout time:
- In January of 2018, the company was valued at $1.5 billion
- By October 2018, the company’s valuation popped to a whopping $3.5 billion market cap
Investors
- Its main VC investors include: Sequoia Capital, Altimeter Capital, ICONIQ Capital, Capital One Growth Ventures, and Shutter Hill
- Venture Capitals have collectively invested $1.4 billion into the company so far.
- The fact that Warren Buffet is willing to bet big on this company’s IPO also acts as bullish stimulant, especially knowing that Buffet is famous for his dislike towards tech stocks.
Financials
- Snowflake shows stunning revenue growth
- Their 2020 Q2 revenue hit a staggering target of $133 million, demonstrating a 121% year on year growth
- Compared to their counterpart Datadog (DDOG), whose Q2 revenue showed a 68% yoy growth, it could be said that Snowflake’s revenue growth is massive
- While their financials are still at a net loss, their losses for the first half of the year was at $171.3 million, which is a $6 mil reduction compared to that of last year
Business Model
- Snowflake has been building a data warehouse since 2014
- They offered a virtual data lake between cloud suppliers and a company’s program/application
- This allows clients to easily approach massive amounts of data quickly
- With the shift from on-premise to cloud services, more and more companies enter the cloud service industry as clients
- Snowflake is also attempting to make a transition from a warehouse to a platform.
- This is because Snowflake is available for use in Amazon, Google, and Microsoft’s public cloud in 22 countries.
- Essentially, it acts as a platform that connects different cloud services, making the access and transfer of data from one cloud to another easy
- Through Snowflake’s platform, the operation of a data cloud is possible.
- This essentially means that the conventional on-premise, infra clouds, and app clouds can have access to, share, and extract data without any barriers
- As such, one of the greatest value their business model offers is the network effect through the interoperability of different cloud services
Conclusion
While the cloud service industry continues to be highly competitive among Amazon, Microsoft, and Google, Snowflake offers values that could easily enlarge the pie. Its solid business model offers potential to make net profits once they start cutting their massive marketing costs. Anyone who is bullish on the outlook for the cloud servicing industry should definitely have his eyes on this stock.
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Snowflake got listed on the New York Stock Exchange yesterday at $120 a share.
Prices immediately opened at $245, doubling the IPO Investors' returns.
The 5 minute chart demonstrates the stock shooting up to $318 before correcting down to $231. The market closed at $252.
As mentioned in one of my comments below, participating in this stock's IPO as a retail investor is close to impossible. As such, the only option for individual investors was to purchase the stock once listed. Since there is no price action history, I will personally be observing the stock's technicals to assess the probability of a major correction, as Uber Technologies (UBER) demonstrated a 66% correction after its IPO. My goal in approaching this stock will be to find the optimal entries for long term profit maximization.