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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.
Comment
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Tradingview has updated the Snowflake (SNOW) chart and ticker.
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 $252.
As mentioned in one of my comments below, participating in this stock's IPO as a retail investor is close to impossible. As such, the only option for individual investors was to purchase the stock once listed. Since there is no price action history, I will personally be observing the stock's technicals to assess the probability of a major correction, as Uber Technologies (UBER) demonstrated a 66% correction after its IPO. My goal in approaching this stock will be to find the optimal entries for long term profit maximization.
What's the "Snowflake Inc" that tradingview.com shows with the SNOW ticker today, before the IPO, with a chart that seems like it was bought out in 2017?
Bitzap
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Ah, looks like that was "Intrawest Resorts Holdings, Inc", which also used SNOW for ticker, and was acquired in 2017. Hope tradingview clears the back history for the ticker...
Michael_Wang_Official
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@Bitzap, Yes, this is technically a different stock, but I had to choose a chart to upload the analysis. Thank you for your interest :)
TayFx
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Something else interesting about IPOs right now is that the last time we had so many, was 2001 before the market crashed 🙈
Michael_Wang_Official
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@TayFx, Very interesting point indeed. I know a few of my colleagues are expecting a tech crash sooner or later as well.
The only other things to watch other than bonds are the shiller ratio adjusted for inflation and the fact that 52$ of kids my age are living w/ their parents. Those are fundamental problems we can't deny no matter how neutral the advance/decline ratio is in the equity markets.
UnknownUnicorn5511258
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@TayFx, dont forget the metallic guys. if inflation were accounted for properly (and not double counted as a reserve asset on the FED's and US GOVT's books), gold should be around 10k about now. Give it a week or two, and I foresee equities like this one falling fast.
TayFx
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@Michael_Wang_Official, Record amounts of capital flowed started flowing into the Nasdaq in 1997. By 1999, 39% of all venture capital investments were going to internet companies. That year, 295 of the 457 IPOs were related to internet companies, followed by 91 in the first quarter of 2000 alone. The high-water mark was the AOL Time Warner megamerger in January 2000, which would become the biggest merger failure in history.
Fed Chairman Alan Greenspan had warned the markets about their irrational exuberance on December 5, 1996. But he did not tighten monetary policy until the spring of 2000, after banks and brokerages had used the excess liquidity the Fed created in advance of the Y2K bug, to fund internet stocks. Having poured gasoline on the fire, Greenspan had no choice but to burst the bubble.
Michael_Wang_Official
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@TayFx, Thank you so much for sharing this. It's a very interesting perspective that definitely deserves more attention.
TayFx
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@Michael_Wang_Official, thanks for being a normal user and providing content for the masses!! I know the feeling of putting in work and hoping it will impact. I can promise it will in ways you wont understand