A Look At Snowflake's S-1
*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor a registered financial expert. Please see a financial advisor before making investment decisions.
Lately, Snowflake filed their S-1 as it is looking to go public. With tech valuations being higher than never, many startups are looking to take advantage of these times and go public. As the economy continues to take a toll from the coronavirus pandemic, Snowflake happens to be thriving at the same time.
What makes Snowflake a unique company isn't its fast-growing revenue. It's the business Snowflake is in. Snowflake created a technology that allows companies to store and manage their data in the cloud. Because Amazon, Google, and Microsoft are the two other big companies that are doing that, Snowflake is essentially a direct competitor to these firms and specifically to their core businesses. In other words, Snowflake is a direct competitor to AWS, Azure, and GCP (Google Cloud Platform).
When you see companies like Amazon, Microsoft, and Google, cloud computing has been their biggest source of profits and growth. What makes Snowflake different from these other tech giants is that Snowflake is a pure-play on the cloud computing business. Google, Microsoft, and Amazon all have other businesses that they can rely on if ever the cloud computing market collapses.
A Deep Dive Into The S-1
"our customers included seven of the Fortune 10 and 146 of the Fortune 500..."
Having seven out of the Fortune 10 companies use their services is amazing. At the same time, I do wonder if the other three Fortune 10 companies are Google, Amazon, and Microsoft. Meanwhile, Snowflake looks to have over 20% of the Fortune 500 companies as its customers.
Snowflake is a play on the aging data storage infrastructure. The legacy databases not only keep data scattered but they aren't able to accommodate larger volumes of data. With the more becoming digitalized and more data is being gathered, stored, and analyzed, legacy databases can't handle the larger swathes of data and often charge customers more for storing more data. Plus, there are many other issues that are prompting companies to send their data to the cloud. Snowflake has been able to create better solutions for businesses looking to become more digitalized.
What's interesting about Snowflake is that while they compete against AWS, Azure, and GCP, their services are offered across those three public cloud platforms. So even if Snowflake does succeed in taking more market share from those tech giants, as long as Snowflake operates on those platforms and doesn't lead clients into their own platform, AWS and its peers will still maintain relevancy and continue to generate profits.
When it came to risk factors, I rarely see this risk factor for many tech companies but because it was geographically focused, I had to point this out:
"Our United States corporate offices and certain of the public cloud data centers in which we operate are located in the San Francisco Bay Area and Pacific Northwest, regions known for seismic activity. Despite any precautions we may take, the occurrence of a natural disaster or other unanticipated problems at our facilities or the facilities of our public cloud providers could result in disruptions, outages, and other performance and quality problems."
To sum it up, Snowflake would be in big trouble if ever a mega-earthquake in California, especially from the San Andreas fault, happened. That is something to keep in mind as 2020 continues to come up with unexpected natural catastrophes.
For the financials, while their revenue growth is impressive, their losses have swelled as well.
Conclusion
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