We covered Palantir in the last article and we are shifting our focus to yet another data winner which we think will be a multi-bagger in the next 10 years.
And our focus is on Snowflake (NYSE:SNOW) – the Warren Buffett-vested cloud data platform which empowers customers to pool and analyse all of their enterprise data in a single view – dashboard, if you would. What exactly is this “Cloud Data Platform”, you ask?
Let’s think about it from Amazon’s viewpoint. As we know, Amazon is now 190,945% growth from the day it IPOed. Amazon launched AWS S3 in 2006 because of that, businesses started to buy-in to its cloud storage and began to do away with their in-house servers as data storage could now happen on the cloud. Today, of course, we have different other cloud businesses like Alibaba Cloud, etc, that serve the same purpose.
Now that most companies have their data on cloud, the next stage will be served by this company called Snowflake. What it does is to leverage on these existing cloud computing to simplify big data management and analytics that need to happen. Its enterprise users can utilise it to work on the data stored across various cloud providers like Amazon, Microsoft, and Google, etc. without having to pool the data into a central location again. This calls for great scalability as the cumbersome manner of getting data into a single place for analysis can be done away with.
A testimonial from Akamai, its customer:
“We had 16 database servers and we couldn’t afford for any of those to fail, Adding two servers here, two servers there—that became a management nightmare. Cost was an issue and so was maintenance. The only affordable, zero-maintenance and fully elastic cloud-built data warehouse was Snowflake. Akamai could scale up, down and out automatically or with a click of a button to execute queries at varying performance levels without paying more.”
How has it done so far?
Its execution of strategy has been phenomenal.
- Product revenue of $213.8 million, representing 110% year-over-year growth
- Remaining performance obligations of $1.4 billion, representing 206% year-over-year growth
- 4,532 total customers
- Net revenue retention rate of 168%
- 104 customers with trailing 12-month product revenue greater than $1 million
The following table summarizes our financial results for the first quarter of fiscal 2022:
First Quarter Fiscal 2022 GAAP Results First Quarter Fiscal 2022 Non-GAAP Results(1)
Amount (millions) Year/Year Growth
Product revenue $213.8 110%
Amount (millions) Margin Amount (millions) Margin
Product gross profit $141.8 - 66%
$154.5 - 72%
Operating loss ($205.6) (90%)
($35.8) (16%)
Net cash provided by operating activities $21.9
Free cash flow $12.9 6%
Adjusted free cash flow $23.4 10%
The important keys behind analysing this is that firstly, its revenue is growing at a huge clip – 110%.
It is narrowing losses with each quarter, which is essential for a growth stock. Its business model is designed to grow with its customers (scalability), where customers pay for the storage, computing power and data transfers that Snowflake offers. As customers pay only for what they use, Snowflake is positioned to grow as customers grow.
Take a look at the cloud storage market:
The current projection is a growth trajectory from $50.1b in 2020 to $137b by 2025 (CAGR 22.3%). The cloud analytics market itself is poised to reach $72.4b by 2026 from $13.15b in 2018 (CAGR 24.3%).
Our take – Like Palantir, Snowflake is worth a starter position with an add on to dollar cost average over time.
Yours,
Chief Editor
BBA Market Perspectives
*Not investment advice. Do your own due diligence before you invest!
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