Is Snowflake Stock a Buy After the IPO?

If you haven't yet checked out the cloud computing market, do it now. In 2019, researchers predicted this industry would grow from $266 million to $832 million, a total of 212%, by 2025.

It is well on the way. And the latest tech IPOs are contenders to grab a piece of that 212%.

Today, we're going to talk about one of the most exciting IPOs this year and whether you should buy Snowflake stock once it's public.

Snowflake is a cloud software company that announced its IPO amid a slew of tech IPO announcements on Monday, Aug. 24. This was huge because it had been such a slow year for IPOs.

Startup founders have been slow to take their companies public with all the uncertainty surrounding the pandemic.

IPO activity fell by 48%, which was a 67% decrease in IPO proceeds, for April-March 2020, when COVID first arrived on the scene.

Investors have drifted to other investment vehicles meanwhile, like SPACs.

But now, case numbers seem to be leveling off. Vaccines and treatments are emerging. And if we do get an additional wave of COVID-19, society will have hopefully gained a better understanding of how to grapple with it.

This could be the logic underlying the announcements of five tech IPOs last week - Unity, JFrog, Asana, Snowflake, and Sumo Logic.

But the Snowflake IPO is the most highly anticipated one on the list. The company offers an SaaS data platform that helps businesses get data-driven insights. They can learn more about their customers, their own operations, and make decisions to operate more efficiently.

This company faces competition from Microsoft Corp. (NASDAQ: MSFT), Inc. (NASDAQ: AMZN), and Google in the cloud computing field. These companies have had wild success with their cloud computing platforms, Azure, Amazon Web Services, and Google Cloud, respectively.

That might sound like stiff competition. But a widely held opinion by many analysts is that none of these companies has truly cornered the market yet.

In fact, Amazon has a 33% share, Microsoft has 17%, and Google has 4%. The cloud computing industry is so diverse that there is plenty of room for new competitors to claim niches and reach profitability.

As big data and artificial intelligence explode - with more data and more ways to organize it - cloud computing stocks will soar.

That's why the Snowflake IPO is one of the more exciting tech IPOs to watch in fall 2020.

Here's whether or not you should buy Snowflake stock when it goes public.

Is Snowflake Profitable?

Snowflake revenue more than doubled in the fiscal year ending Jan. 31, 2020, from $96.7 million to $264.7 million, a 178% increase.

Just Released: You don't need to time the market perfectly to build wealth - you just need to buy the right stocks. Get our 7 must-have picks for free here.

Unfortunately, their net losses grew as well, from $178 million to $338.5 million. So they are not yet profitable.

But this is typical for startups like Snowflake.

You see, the company was only founded eight years ago, in 2012. Its service has rapidly gained popularity in just eight years, landing partnerships with hundreds of big-name companies like Capital One Financial Corp. (NYSE: COF), Sony Corp. (NYSE: SNE), Square Inc. (NYSE: SQ), and more.

Fast growth can often mean fast spending as well. Companies start out burning a lot of cash to build their business.

Snowflake's business is in relatively high demand today, in fact. More companies and individuals are looking for reliable cloud computing solutions as the work-from-home trend grows.

In short, a net loss definitely does not mean the IPO will be a flop. But it also doesn't mean you should rush to investing in the snowflake IPO...

When Is the Snowflake IPO Date?

The Snowflake IPO is coming the week starting September 14, 2020. The company intended to go public at some point in summer 2020. But the pandemic put that on hold.

The now that it's finally going public, the stock will trade under the ticker symbol SNOW.

Snowflake is actually one of the more valuable startups filing for IPO this year. It saw revenue growth of 133% in the first half of 2020.

$23.7 billion is the company's valuation at the high-end.

This all makes it one of the more exciting cloud computing stocks on the IPO horizon. But before you dive into IPO investing, you might want to check out some already-public stocks that are set to pop in the future...

Three Stocks Even Better Than Snowflake

Chief Investment Strategist Shah Gilani just held his first-ever stock-picking lightning round event - running through more than 50 stocks to tell you if they are stocks to buy or stocks to sell.

Dozens are overpriced and overhyped - you should ditch them ASAP.

But Shah says THESE three stocks are "screaming buys."

All three are trading at a discount... they're under-the-radar companies most people haven't even heard of... and they have massive tailwinds ready to send their share prices into the stratosphere.

To get the company names, tickers, and price targets for Shah's picks, go here now.

Follow Money Morning onFacebook and Twitter.

About the Author

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

Read full bio