How to Buy Snowflake Stock

Managing data has become a very critical function for business operations. So choosing a data platform that can handle big data and is also easy to use is crucial.

A cloud-based data warehouse company and triple-digit growth, Snowflake Inc. is an attraction for giant investors such as Amazon, Google, and Microsoft. The company went public in late 2020. More than a year later, Snowflake continues with its achievements at a high level, and the company’s shares are in demand on many stock markets.

Let’s learn more about the company, its history, how to buy Snowflake stock, and what the future holds.

About the Company

Snowflake was founded in July 2012 in San Mateo, California, by three data experts: Benoit Dageville, Thierry Cruanes, and Marcin Żukowski. Since May 2021, Snowflake has been operating from one principal executive office located in Bozeman, Montana.

With more than 3,000 employees working in 20 countries, Snowflake is a globally distributed company. It has become a global force with features like separation of storage and compute, data sharing, and data cloning. The company also serves a wide range of technology areas, including data integration, business intelligence, advanced analytics, and security & governance.

Snowflake Stock IPO

Snowflake trades on the NYSE under the ticker symbol SNOW. The company went public on September 16, 2020, listing its shares at $245 apiece – more than double the expected IPO price. The IPO opening price valued Snowflake at $67.94 billion, which was five times more than its $12.4 billion valuation in February 2020.

And although in 2020, the company’s revenue didn’t surpass $600 million, Snowflake is now valued at $84 billion. Snowflake expects its product revenue growth to come at 65%-67% for fiscal 2023. Here, naturally comes the next question…

Should You Buy Snowflake stock?

Since its initial public offering in 2020, Snowflake’s stock valuation has been high. But does that indicates the stock is a buy, and are there any warning signs? Let’s find out!

Financial performance

Snowflake reported $1.1 billion in revenue for fiscal 2022, which represents a 106% growth year over year. During the period, sales and marketing expenses represented 61% of total revenue, and the research and development was 38% of total revenue. In 2021, sales and marketing were 80% of the revenue, while research and development was 40%.

Snowflake’s remaining performance obligations are even more impressive, which are an important KPI (key performance indicator) because they represent future revenue that is not recognized yet. Thus, Snowflake is expected to grow revenues even further.

Even if Snowflake isn’t profitable yet, the company is investing slowly in its growth and strives for profitability. The company’s gross margins (company’s sales minus its cost of products sold) have improved from 58% in fiscal 2019 to 72% in 2021.

Snowflake stock p/e ratio as of May 27, 2022, is 0.00. The price to earnings ratio is the ratio of a company’s share price to the company’s earnings per share. The ratio is used to find out whether the company is overvalued or undervalued.

Dividends

It often takes companies a few years to increase the size and scale of their business and grow earnings so they can initiate a dividend payment.

Snowflake, which has had just one year of positive cash flow, does not pay a stock dividend yet. In fiscal 2022, the company had a free cash flow of $149.8 million. In 2020, the figure was a negative $94 million.

Clearly, Snowflake has a high cash burn rate and this is not uncommon for tech companies. Snowflake stock is also expensive, and investors within the company own shares for the potential capital appreciation. However, this does not mean that the investors should avoid investing in Snowflake stock.

Snowflake stock performance

On May 27, 2022, Snowflake stock closed at $129.91. In the year to date, the shares are down over 60%. Amid software sector volatility, the 52-week stock price range is $112.10 – $405.00.

Since hitting a low in March 2022, the company shares have continued to fall, opposing the trend of several other cloud-related stocks.

Snowflake stock forecast

Although Snowflake is projecting strong growth and achieving leverage, it may be a long time before it generates consistent profitability. In June 2021, the company laid out a plan to achieve $10 billion in product revenue by fiscal 2029, which may lead to an annual growth rate of 44%.

Based on 27 Snowflake stock analyst ratings, the company has a consensus buy rating. The average price target is $22.16, with a high forecast of $415 and a low forecast of $120.

Your portfolio

Before making any decision, you have to find out whether Snowflake is the right stock for you or not. Check the pros and cons of the company’s stock, and also be aware of your financial situation.

Are you ready to commit to long-term investment? How will Snowflake fit into your portfolio?

Stock market experts recommend investing in companies that span various sectors to become more resilient and balance the risk.

How to Buy Snowflake Stock

To purchase Snowflake stock, investors need to open an account with a brokerage. Investors can buy shares using any online or traditional brokerage.

Online brokers

An online broker is a regulated broker or registered investment adviser who provides financial advisory and investment management services such as the purchase or sale of stocks and other investments to the financial market in return for a commission or fee.

Snowflake stock can be purchased through many trading platforms such as Robinhood, Webull, Charles Schwab, E*Trade, Fidelity, and Vanguard Brokerage Services.

Can anyone open an account?

Opening an account requires filling out an application with the brokers, funding the account with money to pay for trades, and also entering payment details to fund additional cash transfers if needed. In most states, you will have to be 18 to open your account.

After signing up, you will receive a verification either through an in-person check or on the phone, and you will be asked to disclose your details.

ETFs

The largest Snowflake stock ETF holder is the Vanguard Total Stock Market, with approximately 1.71 million shares. The company is a class A in the US stock market and it holds 123 traded ETFs. SNOW has around 8.9 million shares in the US ETF market. Spear Alpha ETF has the largest allocation to SNOW stock with a weight of 6.34%. US ETFs allocate 0.79% of Snowflake stock to their portfolios.

With SNOW as a holding, the best ETF in the past 12 months is the Simplify Volt Cloud and Cybersecurity Disruption ETF, with a return of 17.87%.

Financial advisor

These professionals are responsible not just for executing trades in the market, but they help you make decisions about investments or other courses of action. Financial advisors often charge a complexity-based retainer, typically based on a percentage of income and net worth and percentage-based: typically 1% of the managed portfolio.

Final Thoughts

Snowflake is a strong company that could be a great long-term growth stock to own. Investors should celebrate the dip in shares and may want to consider a dollar-cost averaging strategy to build a position. Of course, nobody knows where a stock will go tomorrow, and every investment carries a risk, so there always will be pros and cons to investing in stocks.

Hopefully, this article has given you an insight into the Snowflake company and its financial performance, price targets, and all you need to know about how to buy Snowflake stock.