Is This Warren Buffett’s Next BIG Winner?
Warren Buffett, the 91-year-old investor from Omaha, Nebraska, has made some of the best stock investments of all time, and with a net worth of over $127 billion, the proof is in the pudding. Perhaps his most successful investment of all time was in Apple, where his company, Berkshire Hathaway, made $120 billion – despite buying his first Apple share almost a decade after the iPhone first launched.
In addition, over the last two years, Buffett’s Berkshire Hathaway has made significant gains in another stock in the technology sector, Snowflake (SNOW). In 2020, Buffett’s investment company, Berkshire Hathaway, earned about $800 million when Snowflake went public.
The young tech company is forecast to grow handsomely over the next decade and might prove to be Buffett’s next big winner. So, should this Buffett pick earn a place in your investment portfolio?
3 Years Of 100%+ Sales Growth
Founded in 2012, Snowflake Inc. is a cloud computing-based data warehousing company headquartered in Bozeman, Montana.
The company offers cloud-based data storage and analytics services to its clients. These services are also commonly referred to as “data warehouse-as-a-service.”
Essentially, Snowflake allows its clients to combine and analyze their data from Amazon Web Services, Microsoft Azure, Alphabet’s Google Cloud, and other service providers.
The company went public in 2020, trading under the stock ticker SNOW. It began trading at an IPO price of around $250 per share and hit an all-time high in November 2021, reaching $400 per share.
More recently, SNOW stock has fallen back to price levels closer to where it went public and has a market cap of around $65 billion. That’s surprising when you examining sales growth.
The company reported revenue of $1.2 billion for its last fiscal year, which represented 106% growth over the prior year. In 2021, the company grew revenues by 123% and the year prior sales were up 173.9%. 3 years of 100%+ top line sales growth is simply remarkable.
$8.69 Billion Reasons to Own Snowflake
Snowflake is no ordinary company. It provides a unique service that enables clients to gain more valuable insights into their company data, helping to break down walls of data information. The ability for companies to access, store, and analyze their proprietary data is crucial to gaining an edge over their competitors.
The value Snowflake provides to customers is clear in its numbers. Beyond phenomenal sales growth, Snowflake has high gross margins, coming in at 74.1% in its 2022 fiscal year. This is up from its reported gross margin of 69% in the fiscal year of 2021 and 63% in 2020.
Revenue growth is forecasted at around 66% annually over the next coming years. By 2027, Snowflake is projected to post revenues of $8.69 billion, 4x higher than its estimated 2023 numbers.
Snowflake Goes Global
During Snowflake’s Q4 2022 Earnings Conference Call, Frank Slootman, the Chairman and Chief Executive Officer of Snowflake, discussed the success of the company thus far, as well as the company’s future outlook. Slootman started the call out positively, relaying the message, “We finished fiscal 2022 with the record-breaking consumption and bookings results. Product revenue surpassed $1.1 billion for the full year, growing 106% year over year.”
Slootman went on to say, “Remaining performance obligations were $2.6 billion, representing year-on-year growth of 99%. Q4 was our strongest bookings quarter to date and included a number of large multi-year commitments. Our net revenue retention rate reached 178%, driven by continued growth from our largest customers. In the quarter, we added 14 Fortune 500 and 21 Global 2000 customers.” These numbers put Snowflake in a very good position moving forward.
In addition, Slootman also relayed to shareholders that Snowflake is making huge moves, expanding both its services and geographical reach. Slootman concluded, “We’ll continue to deepen and broaden our geographical scope, expecting faster-growing contributions coming from outside the United States.”
This is a key growth driver. Investors often underestimate the opportunity for companies that dominate local markets to scale abroad and further multiply revenues.
Is Snowflake a Buy, Sell, or Hold?
All signs point to SNOW stock being a strong buy. The company is trading well off its highs, and it should only take one or two strong catalysts to re-ignite the share price again back to former highs.