The name may not be new to you, but let’s see together who Snowflake, the new September IPO, is.
Snowflake is concerned with the Cloud. In particular, it enables companies to manage the huge amount of data produced and use it efficiently. Snowflake of course is not the only one in the world offering this service, it has entered a very competitive market where Amazon, Google, Microsoft and Oracle lead the way (we talked about this in the article related to TikTok – see here). This industry is really growing exponentially since the lockdown was imposed because the amount of data produced via the Internet has exploded. Snowflake would be able to diversify the clouds in which the data are entered and thus make it easier to read. Consider Zoom, which has its data split between Oracle’s and Amazon’s clouds. With Snowflake this would not happen.
Snowflake, the new September IPO.
Would you like two facts about Snowflake? In 2019 it had revenues of $96 million. Today we are traveling around 400 million. Of course, costs have also increased; in fact, negative EBITDA has increased.
But how come we hear about Snowflake? Perhaps because the name has been placed side by side with that of Warren Buffet. The Oracle of Omaha has in fact decided, through its Berkshire Hataway, to buy $250 million worth of shares at the preset IPO price, initially $120. We know that every stock Buffet buys gets people talking. Snoflake in particular is a Tech stock, and we all know Buffet’s skepticism about Tech stocks and, especially, about investing in IPOs (the last time was with Ford in 1956). This may tell us how the title may really have potential.
On the day of the IPO the stock recorded a high at $319, leading Buffet to earn $1 billion at that exact moment, calculating the purchase at $120. Today the stock trades at $240. The stock may now settle down and lateralize for a period after the strong upward jolts. Let us remember that we are witnessing a general sell-off in the markets.
Could joining Snowflake now be a bargain?
This is not easy to say. Evaluations are always difficult to make when it comes to IPOs, and there is not much data available. Certainly the field has an excellent outlook, and Snowflake could be revolutionary in part. And then if Buffet puts in the money-it could be additional assurance. But, as I always say, make investments on your research and according to your availability. because Buffet invested only a small portion of his cash in the stock. Don’t get too jealous.