$SNOW days ahead

I just bought my season pass for the upcoming ski season and I’m in the process of recruiting some friends. It’s going to be a weird season. No lodges. Reservation only system. Regardless, I’m excited for some outdoor and safe activities. I am airing on the optimistic side on the reservation system, but I can see this being a nightmare if they oversell tickets.

Speaking of snow, possibly the most anticipated IPO since Uber and Lyft is $SNOW which is set to begin trading Wednesday. Snowflake will be kicking off a huge IPO week with Jfrog, Sumo Logic, and Unity following right behind. Also right past this week will be Palantir, Asana, DoorDash, and Airbnb. Wow.

I’m going to dedicate more posts to talking about this IPO season over the next few days, but I wanted to focus on Snowflake in this post.

Overhyped, expensive, best IPO buy of 2020? Possibly all the above. It is the most hyped IPO of the year. Even the King of value investing, Warren Buffet himself is getting in on the action.

(Disclaimer: I have worked with a lot of Snowflake clients over the past couple years and Secfi does have an interest in the company)

So what does Snowflake do? In short, they are a cloud based managed data warehouse. If you want to dig in much more into their product, this article does a great job explaining everything Snowflake.

What’s all the hype anyways? Well Snowflake is growing fast and they are doing it impressively. Revenue grew 130%+ for quarter ended 7/31/2020 compared to 7/31/2019. In addition, the way they are growing is impressive. Their net retention rate is 150+% which means that current clients expanded revenue 50%+ when not even accounting for new logos! If Snowflake didn’t get any new customers in over the last year, they would’ve grown revenue by 50+%.

To add to the bullish sentiment, the market for cloud data storage and analytics is growing at alarming rates. The world of data is not getting smaller by any means. Snowflake is currently riding the gigantic data wave and they’re sitting pretty.

I typically do not buy IPOs, but this is one that I am definitely making an exception for. Buyer beware. It will likely be a very volatile ride for the next year or two, but I remain long Snowflake as I have been for the last two years. The pricing and pop on this one on day one will likely be large. Depending on the price, I may look to start a small position on day one but will monitor this one for dips over the next 12 months.