When word first leaked that Buffett or one of his lieutenants bought a pre-IPO company, shock waves were felt around the investing world.
What company could be so attractive to the Oracle of Omaha and his investment team at Berkshire Hathaway that they would take the plunge on a business with no history in the public markets?
Enter Snowflake, a cloud-based data warehousing solution that has grown by leaps and bounds since its debut in 2020. In lightning fast time, Snowflake catapulted 2x from its IPO price of $120 per share and rose all the way to $401 per share before falling back to earth.
As growth stocks got pummeled, Snowflake didn’t escape the worries of inflation, rising rates, and tighter liquidity. Yet the company is still worth close to $50+ billion. Still, that number is peanuts compared to Meta, which is worth about 10x more.
But will Snowflake eclipse Meta in 10 years?
Snowflake Is Growing Like a Weed
The pace of revenue growth at Snowflake cannot be overstated. The past few quarters’ comparisons year-over-year are a thing of beauty:
- 2020 Q2: 149%
- 2020 Q3: 120.7%
- 2020 Q4: 118.6%
- 2021: Q1: 117.2%
- 2021 Q2: 110.4%
- 2021 Q3: 104.4%
- 2021 Q4: 109.5%
- 2022 Q1: 101.5%
- 2022 Q2: 84.5%
The reason for Snowflake’s growth is its ability to create a new paradigm for businesses. Where previously they stored data across computing platforms, now the data silos are integrated to a centralized warehouse.
Moreover, Tableau and other data visualization platforms can easily connect to Snowflake, making data interpretation simpler.
Where Will Snowflake Be In 2030?
The 7-year forecasts for revenue growth are as eye-popping as they have been in the past. If estimates hit their mark, Snowflake is expected to grow top line revenues at an annual average rate of 36% for the next 7 years.
Not only are revenues stellar but the company boasts a top tier list of customers that includes almost half of all Fortune 500 companies and a quarter of Global 2000 companies.
Expect that number to increase as firms reinvest in the hardware they need to compete with rivals in a fast-changing technology world.
In addition to a growing cohort of top tier customers, Snowflake expects revenues from top tier customers to rise by around 66%, reaching an average $5,500,000 annually.
If that happens, expect margins to spike from nearly 70% to closer to 80%.
Will Snowflake Be Worth More Than Meta?
With so much going for it, can Snowflake take over Zuckerberg’s Meta in market capitalization by 2030?
It’s very unlikely.
Meta is investing billions into the metaverse, a potentially massive revenue growth lever if it can execute well. And if it fails to do so, the combination of Facebook, Instagram, Whatsapp and Oculus, which all fall under the Meta corporate umbrella today have collectively enough eyeballs to produce waterfalls of cash flow that will keep Meta’s valuation head and shoulders above Snowflake’s.
It’s also worth noting that Snowflake trades at a premium today, despite its share price correction from its highs. While it’s feasible that the company could 3x in value by 2030, it would be a brave analyst who would forecast a 10x increase for Snowflake from today’s levels and no increase at all for Meta.
The current forecasts for Snowflake have baked in an assumption that pricing power won’t change much and growth won’t slow. If either of these were to occur, it would certainly hurt the lofty price-to-sales multiples the company currently sports.
The bottom line is Meta will still be a much bigger company than Snowflake by 2030, but if you had to bet on one company tripling in value by then, it would be Snowflake.