Snowflake’s Begins to Freeze

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top IT Services Stock Searches in the Last Month Rank Name Searches #1 'Snowflake 177 #2 'Cloudflare 72 #3 'Fastly 48 #4 'MongoDB 43 #5 'Okta 23 #ad [Become a better investor in just 5 minutes a day]( Brought to you by [Masterworks]( [Billionaires wanted it, but 54,578 everyday investors got it first… and profited]( [Masterworks - Billionaires wanted it, but 54,578 everyday investors got it first… and profited]( When incredibly rare and valuable assets come up for sale, it's typically the wealthiest people that end up taking home an amazing investment. But not always… One platform is taking on the billionaires at their own game, buying up and securitizing some of history’s most prized blue-chip artworks for its investors. In just the last few years, its investors have realized annualized net returns of 17.8%, 21.5%, 35% and more from these opportunities. It's called Masterworks. Their nearly $1 billion collection includes works by greats like Banksy, Picasso, and Basquiat, all of which are collectively owned by everyday investors. When Masterworks sells a painting – like the 14 it's already sold – investors reap their portion of the net proceeds. It's easy to get started but offerings can sell out in minutes. However, as a trusted partner, you can skip the waitlist to join with this exclusive link. [Skip the waitlist]( *See important Regulation A disclosures at [masterworks.com/cd](. Snowflake’s Growth Hits an Ice Patch Snowflake (SNOW) did just under $97 million in sales in 2018. Five years later, it came in just under $2.5 billion. Few companies have grown as quickly and profitably as SNOW. Operating cash flow exploded from $110 million at the end of 2021 to $679 million in the last twelve months. Without stock-based compensation, the company would have turned a P&L profit this year. Are we crazy to think there might be some value here? Snowflake’s Business Ah, Snowflake Inc., the data maven that's more than just another flake in the cloud. Founded in 2012, this San Mateo-based firm is revolutionizing the way over 4,600 clients across industries manage and analyze their data. What makes this snowflake unlike any other? A unique architecture that breaks down data storage, computing, and services into independent layers, letting customers scale as they please and only pay for what they use. Besides providing a multi-cloud service compatible with big names like AWS, Azure, and Google Cloud, the company's design allows for secure data exchanges. This creates a sort of "data network effect," enabling live data sharing among users and organizations. In simpler terms - they allow a company to use and work with data from different sources. [Cloud services] [Source: Snowflake Q4 ‘24 Investor Presentation]( Snowflake operates a consumption-based model, which means it waxes and wanes with corporate spending, making it especially sensitive to recessions. That also makes it a great leading indicator. Financials [Financials] Source: Stock Analysis Sure, SNOW is a darling for some Wall Street analysts who can't get enough of its growth rate and innovative chops. But the financial wizards are not singing in unison. There are concerns over competition and future growth, considering the widening net loss. YoY revenue growth stands at 49.2%. Forward estimates put it at 43.4%. While that’s not a massive decrease, it’s slower and lower than the rates they’ve achieved over the last few years. Shares tumbled after the latest earnings announcement despite positive developments in generative AI products and easier comps. But SNOW doesn’t carry any debt, and its cash flow gives it ammunition to buy its way to growth. Valuation [Valuation] Source: Stock Analysis SNOW isn’t alone in its ridiculous valuation. All the major IT network and infrastructure companies trade at insane multiples, none with a positive GAAP P/E. In fact, SNOW’s 73.2x price-to-cash flow ratio isn’t all that bad comparatively. Only Okta (OKTA) does better at 59.8x. Cloudflare (NET) is a bit worse at 93.8x. Growth [Growth] Source: Seeking Alpha All these companies are built on heavy revenue growth. However, SNOW is the only one to deliver close to 50% revenue growth consistently. Profitability [Profit] Source: Seeking Alpha None of these companies turn a profit on paper. So, we can only look at their gross margins and cash from operations. SNOW doesn’t have the best gross margins. And given the industry, we’d like to see it closer to 70%. However, it generates far more cash than its peers. [Are Alternative Investments a gray area? The Alt can add some color.]( The most profitable investors stay informed and up to date. Stay on top of Alternative Investment trends with credible articles and videos directly to your inbox with our hand-curated newsletter The Alt. [Subscribe now.]( Our Opinion 6/10 SNOW is the best of the bunch. However, it’s also pricey based on its cash flows. Like many newer companies, stock-based compensation is heavy. That should abate over time. While we wouldn’t want to play SNOW outright, this could be a good candidate for a pairs trade, where you buy SNOW and short one of the competitors. But be careful. That type of trade is best suited after a rally, not near the lows, as a squeeze on the worst-hit names can send them up faster. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D590071?utm_medium=ic-nl&utm_source=112331 ) News & Insights Just Spilled - [Cheaper Than MSFT With Better Growth]( - [Tickers Trending Among FinPros & Retail Investors]( - [The Maverick ETF Rewriting the Rules of Market Success]( - [Can Starbucks Impress Big Money?]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3ENotice%3C%2Fb%3E%3A++Undefined+property%3A+stdClass%3A%3A%24previewText+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E102%3C%2Fb%3E%3Cbr+%2F%3E%0Ahttps%3A%2F%2Finvestingchannel.com%2F%3Fp%3D590071?utm_medium=ic-nl&utm_source=112331 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Ads] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](. Manage your subscriptions with our [preference center](. [Unsubscribe here.]( View our privacy policy [here](. Copyright ©2023 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](