(Yahoo finance) – Veteran software executive turn CEO of Snowflake Frank Slootman (aka leader of the hottest tech IPO of 2020) says his company’s early mover position with a data cloud business model will be essential to power the corporations of the future.
“Snowflake is 100% essential, and I am not just saying that because we are Snowflake,” Slootman told Yahoo Finance Live. “If you look at the history of cloud computing, the data later is crucial and essential.”
In its most simplest terms, Snowflake’s data cloud allows companies to break down silos in data they collect in the cloud. The pitch is that better access to data-driven information will lead to faster decision-making inside a company and possibly, better financials.
The pitch from Snowflake (SNOW) attracted big name investors such as Warren Buffett’s Berkshire Hathaway (which still owns 6.1 million shares) before Snowflake made its public debut in mid-September. Snowflake’s high-profile investor base — coupled with Slootman’s careful selection of more long-term minded investors — went a long way to signal to the market that the company could be a successful, profitable tech entity.
Shares shot up 111.6% to about $226 on the company’s first day of trading on Sept. 16. And they haven’t looked back since, with the stock now trading a stone’s throw away from $400.
The company’s first quarter as a public company went a long way to justifying the bull case on the stock.
Total revenue surged 119% from a year ago to $159.6 million. The company lost $168 million as it invested to scale up its business.
But it’s the company-specific metrics on Snowflake that highlight what most on the Street are seeing in the company. First, the company was able to raise prices by 7% in the third quarter despite volatile economic conditions brought on the pandemic. Second, Snowflake added 437 new customers in the third quarter, up from 397 in the second quarter. It added nine customers spending over $1 million a year. Finally, Snowflake’s client retention rate ticked up to 162% in the third quarter from 158% in the second quarter.
“This growth is suggestive of a very large TAM [total addressable market] and clear product market fit,” says Deutsche Bank analyst Patrick Colville.
BTIG analyst Stefan Schwarz was upbeat as well after the quarter. “Overall, we thought it was a good report. Third quarter trends were encouraging, and we came away with a higher degree of confidence in the long term growth story,” Schwarz noted.
The next tailwind to Snowflake’s stock could be a new wave of analysts upgrading shares after months of voicing concern over valuation. Out of the 22 sell-side analysts covering Snowflake, 12 rate it a Hold compared to nine Buys and one Sell. The average price target is $295, and the highest is $350 — both way below the aforementioned $396 current bid.
Slootman probably wouldn’t be surprised by the Street catching up to Snowflake’s story. Remember, he does see Snowflake as an essential service especially during the pandemic.
“We definitely see an increased interest in data analytics as a function of this crisis,” Slootman said.
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