Snowflake IPO: Data Warehousing Company Confidentially Files
In 2019, it was announced that a Snowflake IPO would come to the market. The company confidentially filed with the SEC in June 2020. Snowflake then made its debut in September 2020.
But is Snowflake a good investment? Here’s what we know…
Snowflake IPO: The Business
Three data warehousing experts founded Snowflake in 2012. Its name is a nod to their love of snow sports. The company’s first CEO was venture capitalist Mike Speiser. He remained at the company while it was in stealth mode. It wasn’t until October 2014 that Snowflake launched to the general public under its new CEO, Bob Muglia. Muglia brought experience from his time with Microsoft, where he held several executive positions.
Snowflake is a data warehousing company. It offers cloud-based data storage and analytics services. These allow corporate users to store and analyze data using cloud-based hardware and software. Snowflake’s services currently run on Amazon S3, Microsoft Azure and Google Cloud Platform. The company’s Snowflake Data Exchange lets customers discover, exchange and securely share data.
In 2019, former ServiceNow CEO Frank Slootman became Snowflake’s new CEO. And in October 2019, he said there might be a Snowflake IPO in the summer of 2020. The company recently reached a valuation of $12.4 billion. And it now looks to be worth even more.
Snowflake Funding Gives Lofty Valuation
Snowflake ended its Series G funding in February 2020. The round closed with $479 million raised. With that amount, Snowflake has raised $1.4 billion since its founding and reached a valuation of $12.4 billion.
This isn’t unusual for tech startups. But Slootman thinks a Snowflake IPO will further increase the company’s value. At the time of the company’s last funding round, he claimed revenue had grown 174% from last year and would soon hit $1 billion. He stated…
The reason is that our growth trajectory is so fierce and our addressable market is so large. When companies grow so fast, as Snowflake has, the valuation may seem like a big number now, but not later. When I was with ServiceNow, the valuation was $2.5 billion when we went out, and now it has a $65 billion valuation.
Analysts estimate that the launch of Snowflake stock could bring the company’s value up to $20 billion. And after a couple of years on the market Snowflake currently sits with a market cap of over $54 billion.
Snowflake Stock: Coronavirus Creates Demand for Cloud Services
Since social distancing orders began in March 2020, more employees are working from home. As a result, companies need better platforms to store data and information online. This allows employees to be more productive from home.
So demand for cloud services has increased. And this led to the successful IPO of Kingsoft, a cloud service provider in China. It’s also why the Snowflake IPO is likely to be successful. Cloud service providers let companies store data online rather than in a physical location. This lets employees access data from almost anywhere.
I’ve been getting emails from CTOs all over the place saying that COVID-19 is accelerating their interest. It’s become a catalyst for driving investments in data platforms. The reason is, they’re trying to figure out what the hell is happening to them. There’s an old soccer player in Europe who used to say, ‘Every disadvantage has its advantage.’ And that’s sort of what’s happening here. We’ve become a beneficiary of really bad things happening in the world because they need our platform to help understand it.
Even with countries reopening and the rollout of the vaccine, it’s likely the effects of the pandemic are far from over. There are still lockdowns taking place and people are still working from home.
In Snowflake’s prospectus, the company claims the addressable market opportunity for its platform is $81 billion as of January 31, 2020. Snowflake also believes it can address the markets for analytics data management and integration platforms as well as business intelligence and analytics tools. These markets will have a combined value of $56 billion by the end of 2020 and $84 billion by 2023.
If you’re interested in investing in Snowflake stock, you’ll want to know more about its finances.
Snowflake: The Finances
Now let’s take a look at Snowflake’s finances in the last couple of years since making its stock market debut.
In the fiscal year ending in 2021, Snowflake’s revenue was $592 million. It increased to $1.2 billion for fiscal year 2022. But even with this revenue growth, the company’s net loss got worse. From the fiscal year ending in 2021 to the fiscal year ending in 2022, sales and marketing costs, as well as general and administrative costs, more than doubled. Research and development costs also increased by 53%. This was a big factor in Snowflake’s net loss, which went from $539 million to $680 million.
There’s also the finances from the quarter ending in July 2022 to take a look at.
Compared with 2021, revenue increased 83%, from $272 million to $497 million. Snowflake’s expenses also increased, though not as much as in previous fiscal years. Overall operating expenses increased by 45%, from $366 million to $532 million.
Snowflake’s large growth in revenue and small increases in expense led the company to grow its net loss. It went from $190 million to $223 million. If the company can start to increase revenue at a rate that outpaces expenses, Snowflake could be on the path to profitability.
And now the big Snowflake IPO question investors have is…
When Will Snowflake IPO?
Initially, Snowflake confidentially filed with the SEC. That meant the company’s filing didn’t need to be public until 15 days before its roadshows. Because of this, Snowflake was less likely to be affected by market fluctuations and investor criticism as it prepared to launch on the market.
But on August 24, 2020, the Snowflake filing became public, and less than a month later the stock hit the market. Snowflake filed to trade on the NYSE under the ticker symbol SNOW.
As always, make sure to research before you invest. IPOs can be volatile for the first few months. And share prices can change quickly. But if IPO investing interests you, check out our top recent IPOs and our IPO calendar. We update it regularly to give you the latest news on upcoming and filed IPOs.
Investors should keep an eye out for the Snowflake IPO pricing. As the markets show signs of recovery from the coronavirus crash, the timing couldn’t be better for Snowflake stock.
About Amber Deter
Amber Deter has researched and written about initial public offerings (IPOs) over the last few years. After starting her college career studying accounting and business, Amber decided to focus on her love of writing. Now she’s able to bring that experience to Investment U readers by providing in-depth research on IPO and investing opportunities.