Snowflake Stock: Is It a Buy Right Now?
Snowflake Inc. provides a cloud-based platform for storing and processing data. Data warehousing plays an integral role in the way companies do business, and Snowflake’s product gives them the ability to manipulate large amounts of data quickly on a platform that can be scaled to meet their needs.
Snowflake was founded in 2012 and went public on Sept. 16, 2020. Its initial public offering holds the record for the largest IPO for a software company based in the U.S. The company’s customer list features a variety of well-known companies across different industries, including Capital One, Warner Music Group, Square and DoorDash. The company trades on the New York Stock Exchange under the symbol SNOW.
Snowflake Stock Performance
Snowflake’s IPO price was $120 — well above its initial target range. Even more astounding, the stock opened at $245 a share and kept climbing over the next couple of months. Following a five-month slump during which shares fell from a high closing price of $401.89 in November 2020 to a low closing price of $188.24 in May 2021, the price has again trended upward. The stock closed at $360.34 on Dec. 15.
Snowflake’s revenue has seen robust revenue growth in recent years. Here’s a look at its top-line results over the last couple of fiscal years, which both ended on Jan. 31:
- 2021 revenue: $592.05 million
- 2020 revenue: $264.75 million
Snowflake stock is considered a buy by many analysts. MarketWatch recently reported that 16 out of 30 analysts had a “buy” rating on Snowflake, while the other 14 had a “hold” rating, for a consensus rating of “overweight,” which means the stock’s performance is expected to improve. Those with “buy” ratings include analysts from Deutch Bank and Goldman Sachs.
Is It Worth It To Buy One Share of Snowflake?
There’s nothing wrong with buying a single share of Snowflake stock. That share might only give you a small piece of the company, but you could still make a tidy profit if the stock price continues its upward trend.
Just keep in mind that investing in the stock market always comes with a risk — even if you only buy one share. Snowflake’s stock is a case in point. Its price more than doubled during its first three months on the stock market, but then fell more than 25% over the next several weeks. Putting all of your money in a single stock goes against most analysts’ advice. If the stock price decreases after you buy it, your investment decreases as well.
How Snowflake Makes Money
Snowflake’s product is a cloud-based data platform that companies use to store the data they use to evaluate and operate their businesses. Brands that operate in the same space, in competition with Snowflake, include Oracle, MongoDB, Amazon’s AWS, Google Cloud and Microsoft’s Azure.
What Makes Snowflake Stand Out?
Snowflake’s architecture sets it apart. It blends traditional shared-disk database architecture with shared-nothing database architecture. The result is a system designed specifically for the cloud that can process large amounts of data in a short period of time — or even immediately.
In addition, the company offers scaled pricing so customers don’t pay for services they aren’t using. The platform can be scaled up or down for businesses so they only use the layers they need. This is an important distinction from similar services that charge subscriptions.
Snowflake primarily produces revenue by selling the database platform to consumers. It also earns money through professional services it offers to clients. These services include educational products and training for customers transitioning to the platform.
How To Buy Snowflake Stock
Buying Snowflake stock is the same as buying any other publicly traded stock. Here’s a quick primer:
1. Decide Where To Buy Snowflake Stock
The easiest way to buy Snowflake stock is from a brokerage firm, either by contacting the firm directly or using its website. To buy through an online brokerage, you first need to set up a brokerage account. Snowflake does not currently list a way to purchase stock directly from the company.
2. Evaluate Snowflake and the Stock’s Performance
Before buying stock, it’s important to research and evaluate both the company’s performance and the stock’s performance. Take the time to read its prospectus and SEC filings. These will let you learn how it has fared in terms of revenue growth, earnings, customer growth, debt load and other financial metrics. To evaluate Snowflake’s stock, keep an eye on its performance over time (per Yahoo Finance):
- Latest Price: $360.34 (as of Dec. 15)
- 52-Week Closing High: $401.89 (Nov. 16)
- 52-Week Low: $188.24 (May 13)
3. Determine How Many Shares You Want To Buy
The number of shares you can buy depends on how much money you have to invest. If you have $1,000 to invest, you can buy two shares of Snowflake stock at the current price. If you have $10,000 to invest, you can buy about 27 shares. A financial advisor can help you determine how much you have available to invest.
If you don’t have enough money to invest in individual shares of stock, you can invest in mutual funds that hold shares of Snowflake.
Mutual Funds To Consider:
- Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
- Morgan Stanley Insight Fund (CPOAX)
- American Funds The Growth Fund of America (AGTHX)
4. Decide Your Order Type and Place Your Order
The final step is to place your order with the broker. You’ll need to choose between a market order and a limit order.
A market order is an order to buy or sell stock immediately. With this type of order, you will be able to buy or sell stock, but you have no control or guarantee over the stock price.
A limit order is an order to buy or sell stock at a certain price. You’ll get the price you want, but you have no control over when you’ll be able to buy or sell the stock.
Is Snowflake Stock a Buy Right Now?
Some analysts have a “buy” rating on Snowflake stock. They note that institutional investors have shown strong support for the stock, and that company revenue has seen robust year-over-year growth.
This is expected to continue as Snowflake increases its customer base, thanks in part to an aggressive sales plan. Sales are also increasing as existing customers spend more money on Snowflake’s products and services.
Analysts who rate Snowflake a “hold” rather than a “buy” might do so because of the stock’s volatility. Although the stock is currently on the rise, it’s had its share of ups and downs, including a 29 point drop on on Dec. 1. Although it bounced back quickly, there’s no guarantee against future dips — momentary or longer term.
That said, Snowflake is a growing company that could pay off well for long-term investors. The third quarter of the company’s fiscal year 2022 saw a 110% year-over-year growth in product revenue. Snowflake had 148 customers who drove $1 milion or more in revenue over the past year, up 128% year over year. Total customers also grew, increasing 52% year over year, to 5,416, with 30% growth in the number of Fortune 500 customers that use its products.
- Strong institutional support
- Stock still trades well above its IPO price
- Strong customer and revenue growth
- Company poised to be a game-changer in the cloud data analytics field
- Volatile stock performance
- Shares might be overvalued
- Lack of historical stock performance data
The best idea is to consult a financial advisor when weighing whether to buy or sell Snowflake stock. A professional can assess your financial situation and help you set goals to guide your financial decisions.
Daria Uhlig contributed to the reporting for this article.
Information is accurate as of Dec. 15, 2021.
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- Snowflake. 2021. "Snowflake Reports Financial Results for the Third Quarter of Fiscal 2022."
- MarketWatch. "Snowflake Inc."
- Nasdaq. "SNOW Financials."