I Just Bought 140 Shares of Snowflake (SNOW) at $207.63. Here’s Why…
Artificial Intelligence (AI) stocks had a blockbuster 2023. Nvidia, the chip maker went from $148 to $617 a share. Microsoft (MSFT) went from $219 to $403 and many smaller AI stocks ramped up triple digits before profit taking pushed them down again.
But it’s not too late to profit. The AI journey is just getting started and the recent selloff allows us to stock up on AI stocks before the next leg up. Today I’m going to tell you about Snowflake (SNOW).
The first thing you should know about AI is that at its core it is a tool that interprets data. The winners will be companies like Amazon, Google and Microsoft who have massive amounts of data.
That said, one must interpret all that data in a way that is useful. The number one company that manages data is Snowflake Inc.
Here is the company blurb from Yahoo!:
“Snowflake Inc. provides a cloud-based data platform for various organizations in the United States and internationally. Its platform offers Data Cloud, which enables customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data and data products. The company was formerly known as Snowflake Computing, Inc. and changed its name to Snowflake Inc. in April 2019. Snowflake Inc. was incorporated in 2012 and is based in Bozeman, Montana.”
Big Data is Big Business
Gartner Market Research is the gold standard for software reviews. If you make the top right of the Gartner quadrant it means that CIOs and other IT professionals can go to their board and say look, Snowflake is the best of breed. It is well worth the millions of dollars it will cost to get it.
Snowflake is in the top right quadrant with the big boys and is the only pure play you can buy.
Right now Gartner is saying that cloud application spending will surpass traditional IT spending for the first time this year.
They write: “Spending for cloud applications (Software as a Service) will reach $244 billion this year, up nearly 19 percent from 2023, and by 2028 70 percent of IT workloads will run in cloud environments.
Businesses and organizations are rapidly adopting cloud software of all types including ERP and CRM software, collaboration and communications systems, data management and analytics platforms, and AI and application development tools.”
Snowflake is a data warehousing company. The company provides cloud-based data analytics and storage.
The company went public in September 2020 and saw its share price go from $120 to $385 in just a few months. In the latest quarter Snowflake made $734.2 million in revenue, up 32% year over year. Granted, this growth has slowed from the 100% plus of a few years ago but it is solid repeat customers who are paying up.
At the end of the quarter, Snowflake had 436 customers who spent at least $1 million with the company in the trailing 12 months. That’s a jump of 52% from the same quarter last year.
Big customers with big spends tend to stick around. Furthermore, Snowflake benefits from scale. Its product margin was 78.3% in the third quarter, an increase from 74.6% the previous year.
Those are huge margins, the type Apple (AAPL) used to get back in the day.
Don’t get me wrong. Even at half-off its all time high Snowflake isn’t cheap. They have yet to turn a profit, though they have the projection of $10 billion in revenue by 2029.
What you are buying is growth and the AI story. Snowflake projects that it can grow at 30% a year for the next five years. They will likely do better. As interest rates come down and companies have to answer the AI question they will spend more on data management.
Why You Should Buy Now
I want to own a part of the AI story behind Microsoft and Amazon whose AI segments won’t move the needle like it will with Snowflake.
And this three-year chart provided the catalyst to buy:
Snowflake went public in 2020, hit a double top and then got cut in half. The last two years it has been consolidating. This chart pattern is known as a “coiled spring” pattern. It just broke out and everything being equal you want to buy the breakout on companies you like.
The rule of thumb tells us that it will go higher as much as it went sideways. That would put it at about $450 a share though it would have to get through that double top at $400 first.
Buy Snowflake (SNOW) at the market and plan on holding for five years. It is currently trading at $204.
All the best,
Pro Trader Today