Both Snowflake and Informatica are data management platforms that are well regarded in the industry.

These data management applications are in heavy demand as organizations seek to harness the vast troves of data at their disposal. Without these data analytics tools, analysts and data scientists would struggle with problems such as data dispersal throughout the enterprise in multiple repositories, lack of data integration, and a variety of other data management challenges.

As both Snowflake and Informatica are leading data management platforms, users sometimes must choose between them. There are arguments for and against each.

Which of these well-respected platforms is best? Both provide the volume, speed, and quality demanded by the data analytics applications they typically support. There are as many similarities as there are differences. Yet they each have different orientations. Therefore, selection often boils down to platform preference and suitability for the organization’s data strategy.

Also see: Best Data Analytics Tools 

Snowflake vs. Informatica: Key Features

The Informatica Intelligent Data Management Cloud (IDMC) helps businesses handle dispersed and fragmented data on any platform, any cloud, on multi-cloud and multi-hybrid. It is a cloud-native, AI-powered and offers over 200 data services and it processes over 17 trillion transactions per month.

Organizations can use Informatica to share, deliver, and democratize data across lines of business and other enterprises. Data catalog scans metadata to discover and understand enterprise data. Data integration accesses and integrates data at scale using serverless computing.

Informatica’s API & App Integration connects applications and automates business processes. MDM & 360 applications provide 360 views of business data. Informatica IDMC is powered by an AI and ML engine called Claire. It can be used to discover and understand all data within and outside the enterprise, access and ingest all types of data, and curate and prepare data in a self-service fashion.

Most recently, the company announced a new suite of cloud data management services for AWS which is aimed at providing broader data management to departmental users, developers, data scientists, and data engineers across all skill levels. Informatica Data Loader on AWS is embedded directly into the Amazon Redshift console to enable movement from data ingestion to insights in minutes.

Informatica Data Marketplace supports AWS Data Exchange as part of the self-service data marketplace. Informatica INFACore supports Amazon SageMaker Studio to simplify management of complex data pipelines for building and deploying ML models.

Snowflake, in contrast, is a relational database management system and analytics data warehouse for structured and semi-structured data. Offered through the Software-as-a-Service (SaaS) model, it uses an SQL database engine to manage how information is stored in the database, and process queries against virtual warehouses within the overall warehouse, with each one of its cluster nodes independent of others and not sharing compute resources.

Sitting on top of that are cloud services for authentication, infrastructure management, queries, access controls, and so on. The Snowflake Elastic Data Warehouse enables users to analyze and store data utilizing Amazon S3 or Azure resources.

Overall, Snowflake should be regarded more as a data lake or data warehouse that facilitates analytics than a full-featured analytics application. As such, it is particularly good at managing, processing, aggregating, and sharing large amounts of data across a business. Good archiving features are also present.

Late in 2022, Snowflake released some platform updates. These included performance advancements across its single elastic engine to make it faster while improving economics for users. In addition, Snowflake’s Snowgrid technology enables customers to operate at global scale with enhancements across cross-cloud collaboration, cross-cloud data governance, and cross-cloud business continuity.

Overall, there is little to choose between the two. No clear winner here.

Snowflake vs. Informatica: Support and Ease of Use

Informatica Data Loader is a high-speed, no-cost, simple tool requiring no setup for data-savvy departmental users looking for frictionless, high-volume data loading that generates insights from data in minutes. The new functionality offers customers the ability to launch Informatica Data Loader from the Amazon Redshift console in a few clicks, easily ingesting data from AWS, on-premise, legacy systems, third-party applications, and other sources. Using a guided interface, customers can load and combine data in their data warehouse for insights into their business without having to build a custom solution. It scores well on ease of use.

The Snowflake data warehouse is said by users to be user-friendly with an intuitive SQL interface that makes it easy to get it set up and running. It automates data vacuuming, compression, diagnosis, and other features. There is no need to copy data during scale up operations with Snowflake. For third-party data sharing and access to conduct analysis, Snowflake makes the entire process much easier.

Snowflake supports structured and semi-structured data. Users also report that its ability to handle many columns is strong. But some same the documentation is weak and that a lack of out-of-the box analytics holds it back. Gartner Peer Reviews deliver it a good score on ease of deployment and administration.

Informatica wins narrowly in this category. 

Also see: Data Analytics Trends 

Snowflake vs. Informatica: Security

Informatica prides itself in baking in security and trust as central design principles. It does this to ensure the highest level of security and a consistent level of data quality, end-to-end data governance and data privacy across the enterprise. For enterprise users, it reduces regulatory risk by ensuring the accuracy and protection of sensitive data.

Snowflake boasts always-on encryption, along with network isolation, secure access-based requests, and other robust security features. Its security features are tiered with each higher tier costing more. That means you don’t end up paying for security features you don’t need or want.

No clear winner in this category.

Snowflake vs Informatica: Integration

Informatica is one of the few vendors that packages customer first-party data sets and third-party data sets from AWS Data Exchange to be leveraged via Informatica’s Data Marketplace. This assists in discovery, packaging, and delivery of third-party data from AWS Data Exchange. It further enables enterprise data consumers to use internal and third-party data hosted on AWS Data Exchange, which has more than 3,500 data products and more than 300 data providers. This helps to meet users via a self-service model. It can be run in multi-cloud, multi-hybrid, and on-premises infrastructures.

Snowflake is on the AWS Marketplace, which helps integrate it within that ecosystem. Some users say that with certain analytics applications, it can be challenging to integrate Snowflake. But in other analytics use cases, Snowflake is wonderfully integrated. Tableau, Apache Spark, IBM Cognos, and Qlik are all fully integrated. Those using these tools will find analysis easy to accomplish. Regardless, Gartner Peer Reviews rates Snowflake highly for integration and deployment.

Integration: Informatica narrowly wins.

Snowflake vs. Informatica: Pricing

Snowflake costs about $40 a month. But rate of usage will vary tremendously depending on the workload. Some users say large data sets cost more on Snowflake due to the way it offers separate pricing for compute and storage.

On-demand pricing is a feature of Snowflake. It also provides concurrency scaling automatically with all editions at no extra cost. Pricing, though, can be complex with four different editions from basic up, and prices rise as you move up the tiers. You can either pay for capacity upfront or choose a pay as you go model for storage.

The Informatica Processing Unit (IPU) pricing system is built around buying only the capacity you need for different services such as data integration, mass ingestion, data quality, API and App integration, and Catalog and Governance. But rates are hard to find.

Thus, differences between them make it difficult to do a full comparison. Users are advised to assess the resources they expect to need to support their forecast data volume, amount of processing, and their analysis requirements.

This is a close one as it varies from use case to use case, but Snowflake wins by a hair on pricing.

Also see: Data Mining Techniques 

Snowflake vs. Informatica: Conclusion

Snowflake and Informatica are excellent data management tools for analysis purposes. Each has its pros and cons. It all comes down to usage patterns, data volumes, workloads, and data strategies.

Both are good choices when data management, integration, and sharing are the biggest needs. Those wanting to centralize data across multiple data repositories and with large amounts of data will find both invaluable. Top-notch analytics can be added on via other platforms.

Some say Snowflake is better when you are starting small and gradually scaling up.

But these are generalities and won’t always pan out. Each business needs to research how costs will work out for them. The latest Gartner Magic Quadrant (MQ) for Data Integration Tools has Informatica scoring the highest among all vendors. Gartner did not consider Snowflake as part of that MQ. That tends to indicate that where data integration needs are highest, Informatica is the obvious choice. But for broader cloud data management needs, Snowflake may be a better choice.

Also see: What is Data Visualization

In my chat with Serene, an internet freedom activist and former Google Ideas engineer, I ask: "Am I allowed to speak with you right now? Legally?"

“We’re both in the U.S., so yes, I think we’re good,” she answers.

As one of the few tools for accessing blocked and censored information on the web, Serene's Snowflake is widely used by citizens of oppressive regimes. It is primarily done using Tor, an open-source browser that enables secure, private, and anonymous internet browsing.

Snowflake is one of the few pluggable transports, also known as a “Tor bridge,” currently available for the browser. By making it appear like a user is on a regular video or voice call, the project allows users to circumvent internet censorship.

She is now unveiling Snowstorm, an upgraded version of Snowflake, which Serene claims will be faster, more generalized, and have more features. Snowstorm is fast enough to stream YouTube videos, something previous versions could not do.

The software has been rewritten and reimagined using Rust, and a system-wide client, which demonstrates the software is not Tor-based. As a result, users will have more choice and agency.

Furthermore, Snowstorm has established its own company that will maintain the code and support a full-time team of core developers.

Work on Snowflake started in 2016, which began as a collaboration with Arlo Breault and David Fifield, funded by the Open Tech Fund’s Information Controls Fellowship Program.

In reality, Serene, who is also an advisor to the World Ethical Data Foundation, has devoted her entire life to the cause of internet freedom.

Serene learned how to code at the age of nine. As a Bösendorfer-endorsed concert pianist, she also worked with Kanye West on his 2019 opera production "Mary." But we can save that story for another day.

At a young age, she joined Google, where she became the first engineer at Google Ideas, an internal group dedicated to using technology to help those threatened by conflict, instability, and repression.

It was there that she first began working to circumvent the growing number of internet controls implemented by governments. That first project was uProxy, an early experiment based on WebRTC, the foundation for much of the real-time communication on the internet. She built and demoed uProxy at a Google event on a two-week deadline, which was ultimately a success.

After Serene left Google, she continued her fight for internet freedom by becoming a senior fellow with the Open Tech Fund, with a sponsorship from UC Berkeley.

Fast forward to 2016, where Snowflake was started as a research project. It went on to play a key role in circumventing censorship during the Ukrainian-Russian conflict, with Snowflake reporting a corresponding surge in users.

As a result of increased demand and usage, Snowstorm is an attempt to Excellerate the platform's user experience. It relies on volunteers living in countries with open internet access, such as the United States, as "snowflakes.”

A snowflake can be used as a "bridge" by internet users in countries with limited access. A broker is running on a third-party server, disguised by domain fronting, making it seem as if it came from a non-restricted service. The broker knows where the snowflakes are and will connect the two, using WebRTC as a peer-to-peer connection.

The new Snowstorm version addresses many of the limitations and challenges faced by Snowflake, including limited bandwidth, system resources, and other factors.

“Forces of censorship try to divide the world,” she said. “Snowstorm is the bridge that can bring humanity together again.”

Snowflake (NYSE:SNOW) offers a cloud-based analytic database that aims to eliminate data silos. Snowflake continues to innovate and is introducing a number of important products that are likely to help draw workloads onto the platform in 2023. While the stock is not cheap, Snowflake still has enormous growth potential and should be able to generate high margins at scale.

While Snowflake has already achieved an enormous amount of success, they are still working to create a single data universe which maximizes the value of data through analytics. Part of this vision is the creation of a global data sharing network. Customers are embracing this, with 22% of customers having at least one stable edge, and 66% of customers with over $1 million in trailing 12-month product revenue having at least one stable edge. Marketplace listings grew 11% QoQ, and there are now more than 1,700 data listings.

In the past, compliance and privacy issues have made data sharing difficult or even impossible. An important part of enabling data sharing is resolving data governance issues. Data governance refers to the management of data availability, usability, consistency, and data integrity and security. Snowflake has addressed these issues, helping to make a data marketplace viable. For example, Snowflake developed data clean room solutions to address use cases in the advertising industry, but are now spreading these to other verticals. Data clean rooms allow companies to combine data and run analytics on it while maintaining data privacy.

In addition to data sharing helping to maximize the value of data, Snowflake is also introducing features that will attract new types of workloads. Python for Snowpark was recently released, and is foundational for many workloads and user types. Snowpark allows developers to write code in their preferred language and run that code directly in Snowflake. Snowpark allows more users to leverage Snowflake and reduces the need to export data into other environments. Snowpark is one of a number initiatives that will make Snowflake more amenable to data science. Snowpark optimized warehouses will also help Snowflake to capture more machine learning workloads by providing a jump in performance for compute-intensive workloads.

Other features that are helping Snowflake to capture more workloads include support for unstructured data and Applica, a company that Snowflake acquired in 2022 that has an AI platform for document understanding (helps customers to pull data from unstructured documents).

Application Platform

Snowflake believes that the next big evolution of their platform will involve turning it into an application platform. Most modern architectures move data from an operational database to an analytic database and there is a large cost associated with this. Snowflake believes they can eliminate this cost by enabling customers to build applications directly on their analytic database.

Snowflake has been developing a transactional database for some time, although they have said it is more of a transactional database within an analytics database and targeted at new applications development. As a result, it is not going to be replacing Oracle (ORCL) transactional databases and the like, although it one day could.

To support their application platform, Snowflake acquired Streamlit in 2021. Streamlit will help developers and data engineers to build applications in Snowflake. Streamlit is expected to be offered in private preview in early 2023. Since acquisition, the Streamlit community has grown more than 60% and now has approximately 70,000 developers.

Competition

Snowflake has stated that they don’t believe the competitive environment has changed substantially. Competition primarily comes from the hyperscalers, although Amazon (AMZN), Google (GOOG) and Microsoft (MSFT) are all also partners. The partnership with AWS is the strongest, and hence competition with AWS is lower, although Redshift competes more for small accounts. Google is the most competitive when it comes to on-premise migration and Snowflake often only wins Azure accounts when Synapse fails. Snowflake has also said that they don’t see competition from Teradata (TDC) or Oracle HeatWave. Given that over 40% of Snowflake’s migrations are coming from other cloud solutions, the company is clearly in a strong competitive position.

A range of data points towards Synapse being the biggest threat to Snowflake, while the growth of BigQuery and Redshift appears to be more modest, which is not surprising given the strong accurate performance of Azure. Search interest for Synapse pricing has increased significantly over the past few years, and the number of job openings mentioning Azure Synapse in the requirements has increased steadily over the same period.

Financial Analysis

Snowflake isn't particularly concerned about the macro environment due to their low market share, which suggests they believe that market share gains can largely offset a slowdown in market growth. Smaller customers have so far been more impacted than larger customers. This is not particularly concerning for Snowflake as a large portion of their growth is driven by expansion within larger customers. SMBs only account for around 10% of Snowflake’s revenue.

There is also some weakness in APJ, primarily Japan, Korea and Australia, which is likely in part due to the strong USD. Snowflake prices in USD in those countries, making their services relatively expensive. The USD has weakened significantly in accurate months which should be supportive of growth outside the US. Less than 5% of Snowflake’s revenue is invoiced in currencies other than USD.

Revenue growth is expected to be 49-50% YoY in the fourth quarter, which implies a fairly significant slowdown in growth relative to the previous quarter. Snowflake has stated that they try to provide guidance so that they beat by 3-5% though. It appears that Snowflake is expecting the next few quarters to be a bottom, as revenue growth is expected to be approximately 47% in FY2024, driven by large customers who have already signed but are only expected to ramp workloads in 2023, as well as Snowpark for Python.

Due to Snowflake’s consumption model, revenue visibility is low compared to many SaaS peers. Management has suggested that workloads on Snowflake are often tightly integrated into core business processes, and hence should be fairly sticky, but 70% of Snowflake’s revenue is tied to human interaction, and the other 30% is driven by scheduled jobs. This could imply that a reasonable degree of Snowflake consumption is discretionary.

Snowflake’s largest verticals are financial services, advertising, media and entertainment, followed by retail and consumer packaged goods, technology and healthcare and life sciences. In the last quarter, financial services grew faster than the company overall, while advertising and media and entertainment grew slower, and technology underperformed.

Crypto customers were an area of weakness for Snowflake in 2022, with three large crypto customers contributing 41.8 million USD of missed revenue relative to expectations at the beginning of the year. Cryptocurrency prices have rebounded somewhat in accurate weeks and if trading volumes continue to increase, Snowflake's crypto customers may spend more on the platform.

The decision to implement Snowflake tends to be fairly strategic for customers, and hence deal cycles are reasonably long. For example, the average customer takes around seven months to close and larger customers take 1-2 years. This would suggest that customers are likely to look through temporary economic uncertainty when making the decision to implement Snowflake. This is supported by Snowflake's ability to continue landing large organizations. The company added 28 Global 2000 customers in the most accurate quarter. Product revenue from Global 2000 customers grew 14% sequentially and now represents 40% of revenue.

The importance of Snowflake’s high net retention rate is probably overestimated by investors and is really a function of how customers adopt the product. Large customers tend to land relatively small but then ramp spend fairly quickly. From an investor perspective it would be preferable if investors landed large in the first place, but a high net retention rate should indicate that customers are satisfied with the platform.

The average Global 2000 customer only lands at around 100,000 USD annual spend, although some have landed at 3 million USD. Global 2000 customers generate 1.3 million USD in product revenue on average, and customers with over 1 million USD in product revenue spend 3.7 million USD on average. Snowflake believes there is no reason why Global 2000 customers can't spend over 10 million USD a year.

The number of job openings mentioning Snowflake in the job requirements has eased in accurate months, but has not shown the drop that a number of other technologies have.

The number of job openings mentioning data analytics in the job requirements has also fallen in accurate months, suggesting that Snowflake is facing a soft market rather than company specific issues.

Search interest for Snowflake pricing continues to be robust, suggesting that top of the funnel demand is still fairly robust. Given that Snowflake customers tend to land small and expand rapidly over time, existing customers are more likely to drive near term growth than new customers.

Snowflake believes they can eventually get gross margins into the high 70s and are steadily progressing in this direction. Part of the reason for Snowflake’s current gross margins is the drag that occurs from geographic expansion. When a new deployment is set up, Snowflake must pay for a certain reserved capacity before the business even begins to generate revenue. This capacity must be exceeded before the new deployment becomes profitable, and Snowflake currently has a lot of deployments that are not at scale.

Snowflake also continues to Excellerate their operating profit margins. Further improvement is expected in 2023 on the back of a slowdown in hiring, although the company plans on adding over 1,000 net new employees. Snowflake hasn't been punished by investors for its losses to the extent of some of its peers, which is likely due to strong top line growth and faith in the business model.

Despite ongoing large losses, Snowflake is fairly efficient with its overhead expenses. A large amount is still being invested in R&D to support product innovation. The burden of sales and marketing and general and administrative expenses continues to decline though, indicating the business is scaling well.

Valuation

Snowflake is now priced more in line with peers based on a revenue multiple. The market is currently placing little premium on growth though and hence Snowflake could begin to appear attractively priced over the next 1-2 years if growth persists. Based on a discounted cash flow analysis, I estimate that Snowflake's stock is worth approximately 250 USD per share.

The current valuation does present significant downside risk if growth deteriorates significantly, although it is not clear if Snowflake would move lower than around 120 USD per share, having already tested this level twice.

Conclusion

Investors have bought into Snowflake's vision of a unified data cloud, and hence have been willing to look through temporary headwinds. While the macro environment is dragging on growth, product introductions that capture more machine learning and application workloads should support growth in 2023.

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Big new buy at Gotham

A brand new entrant to Gotham Asset Management's mrq 13F filing is Snowflake (NYSE: NYSE:SNOW). For those unfamiliar, Gotham Asset Management is Joel Greenblatt's fund, the investor who is famed for 50% yoy returns in his first fund, his series of value investment books, and his Magic Formula screener. Snowflake has always been a bit of a mystery to me. Growing its client base at a fast clip but still highly unprofitable on a GAAP and Non-GAAP basis, I always wondered what Buffett and Berkshire (BRK.B) (BRK.A) saw in this IPO (which was the largest ever). It was so uncharacteristic of all the things Warren Buffett and Charlie Munger had preached that I never gave it any thought and simply chalked it up to Todd Combs and Ted Weschler making a wager.

Now that we see Greenblatt making a move after the large drop in share price, that has spiked my interest even more. I am not going to take the typical customer acquisition/future growth possibilities assessment in most articles that analyze unprofitable tech stocks. I want to take a look at the numbers now and see the prospects of digging out of the hole. Snowflake is Greenblatt's largest single stock holding as the top two are the ETF (SPY) and his hybrid SPY ETF called (GSPY). My thesis is this stock is still a hold. There are no GAAP or Non-GAAP earnings to support this play, but if a couple of investors I respect are holding it, I wouldn't recommend selling it either. They get far more perspective and possibly private presentations that we lack. The top line growth also might be worth waiting on if you believe it's about to turn into profits. It seems like it will soon, and when it does, I'm interested.

Berkshire ownership history

At a market value of a tad over $1 Billion, Berkshire Hathaway's position is number 26th on their list of holdings just above McKesson (MCK). First bought in Q3 2020, the average estimated price paid is $238.1. If the purchase price is accurate, Berkshire is down close to 40% on their initial investment. Gotham's purchase price is estimated at $169, down 15.3% from its purchase price. So a couple of value whales are in it for far more than you could get it for in the market right now, how does it look from a value perspective?

Story up until now

I'm not much of a chartist, but I can draw a line. The one-year chart for Snowflake is straight down by 50%. Even though the emoji at the bottom is sad, these charts oftentimes make me happy. If the price is right, bottom-fishing a chart adds some resistance by virtue of psychological reinforcement in the investor that the stock can't go down any further. While I know that the latter statement in the prior sentence is often not true, it does deliver me some added confidence when placing bets. If a stock has amazing heuristics and a parabolic chart, I can still feel a bit nervous on the flip side of this argument.

What they do

From the 2022 10K, here is a summary of what Snowflake does:

Our platform is the innovative technology that powers the Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful business insights, build data-driven applications, and share data. We provide our platform through a customer-centric, consumption-based business model, only charging customers for the resources they use.

Snowflake solves the decades-old problem of data silos and data governance. Leveraging the elasticity and performance of the public cloud, our platform enables customers to unify and query data to support a wide variety of use cases. It also provides frictionless and governed data access so users can securely share data inside and outside of their organizations, generally without copying or moving the underlying data. As a result, customers can blend existing data with new data for broader context, augment data science efforts, and create new monetization streams. Delivered as a service, our platform requires near-zero maintenance, enabling customers to focus on deriving value from their data rather than managing infrastructure.

Whew, that description was a mouthful. Turning to my Morningstar analyst reports helped nail down some succinct descriptions of what makes them special. It seems to be their "stickiness" and large 3000+ customer roster that includes 30% of the Fortune 500. Data Lakes are a new terminology frequently associated with Snowflake, bucking the trend of data warehouses. The difference is mainly being able to access data with more flexibility and using raw data combined with AI to create easily queried insights. Morningstar Analyst Julie Bhusal Sharma is bullish on the name due to the items summarized above.

The main takeaway for the layman that I got from the report is that Snowflake's platform makes it easy for customers to migrate data from other platforms into their cloud-based platform. This ease of migration plus faster data accessibility leads to more customers. Migrating any data from a warehouse in a silo to a new server can be next to impossible after you code the servers to perform different functions. In a simple startup I was involved in, we had 4 small, cheap servers. All the servers were coded in different languages to perform different functions within the software. If we chose to move this data, I can only imagine the migration would require some re-coding and or rebuilding of the app after migration. Not only that, but the pre-beta software data took forever to load. What would happen to a massive web app trying to move things around is beyond my comprehension.

The Software as a service model can run its cloud computing across Azure, AWS, and Google cloud. The one item I didn't like about Snowflake in Morningstar's report is that it used Google (GOOG) (GOOGL), Microsoft (MSFT), and Amazon (AMZN) as comps in the report. Snowflake seems to be more of a cloud computing enhancement offered through data center companies as a medium. Thus they are both a customer and competitor of these behemoths, which is very difficult competition to deal with.

Balance sheet

Both total current assets and current debt are trending upwards. The amount of debt is small however, thus we would assume that some of the additions to current assets are derived from share dilution. Shares outstanding have increased from 305 million to 321 million shares outstanding. As an unprofitable business, these are the main sources of capital for the time being. Below is a snapshot summary of the balance sheet.

Typical for early-stage tech and IT companies, Snowflake has a very liquid balance sheet. Almost $4 billion in cash and a debt-to-equity ratio of only 4.69%. The balance sheet thus far is the most appealing thing about Snowflake to me. This is as close to zero debt as you will get. Very healthy indeed.

Income statement trends

Here's where the obvious play in Snowflake is, in the top line. From 2019 to 2022, revenue has grown from $96.6 million to $1.2 Billion. A staggering 88.77% CAGR in revenue over that period. TTM is at $1.86 Billion, meaning that the numbers continue their trend as they spend to grow. The cost of revenue has a CAGR of 72%. Therefore their revenue growth is trending well ahead of their cost of revenue growth. Snowflake is truly a shot out of a cannon that nobody saw coming.

In 2019, revenue as a percentage of operating expenses was 41%. In 2022 that number is 82%. Revenue as a percentage of expense has nearly doubled and Snowflake is now at only an 18% differential in breaking even between revenue and opex. This is one of the better top-line growth stories I've seen.

Valuation

I like to dream about the future, but fortunately being a numbers guy, my rationality brings me back down to earth. Looking at Snowflake Non-GAAP and price-to-sales numbers on the left compared to the industry comps on the right, the premium for Snowflake is staggering. Even after being cut in half.

Pricing a company purely on price-to-sales is more of a momentum strategy for funds looking to turn over their portfolios within a year, riding the news cycle. However, as demonstrated above on the income statement, even though losses increase due to increased expenses, the revenue percentage to expenses might show positive earnings in the not-too-distant future.

Catalysts

Above is a compilation of analyst estimates on a GAAP eps basis for 2023 and 2024. The majority are predicting profitability versus losses in the not-too-distant future. While I've seen these wrong too many times to count, my analysis of the income statement shows that the possibility is certainly on the horizon. Uber (UBER) is an example of a company that I had been waiting to turn a profit for the longest time but never happened. Peter Lynch recommends waiting until a company turns a profit and I adhere to that rule. If they do, there will still be enough upside left for all of us. Turning a positive GAAP or Non-GAAP bottom line is my number one catalyst.

Risks

Most analyst reports show the biggest risk is over saturation and the lack of a moat that any data center or cloud computing company has. While Snowflake has been lauded for over 100% customer retention rate ( I guess meaning they upsell existing customers at each renewal), I have to imagine the next big data company is out there lurking or already exists and is just tweaking the product. Snowflake seems to have the secret sauce at the moment looking at their top-line growth. However, if that slows or reverts, they may fall into the data lake abyss.

Conclusion

After getting up to snuff on analyst reports and reviewing how they are pricing this stock, I think it is still being priced on a price-to-sales basis. Not only is it being priced on a price-to-sales basis, but also forward 2024/25 numbers. For me to even consider a pre-profitable stock a buy on a price-to-sales basis, it needs to be a single-digit multiple. However, I do realize the top line is growing at breakneck speed with improving margins. Once it turns profitable, Snowflake will be on my watch list as a possible buy after turning a profit. For now, it's a hold, but I certainly am starting to see what Berkshire and Greenblatt's team have been looking at all along.

No-Headquarters/BOZEMAN, Mont., February 01, 2023--(BUSINESS WIRE)--Snowflake (NYSE: SNOW), the Data Cloud company, today announced that it will present at two upcoming investor conferences.

• Chief Financial Officer, Mike Scarpelli, will present at the JMP Securities Technology Conference, on Monday, March 6th, at 2:30 p.m. PT.

• Chief Financial Officer, Mike Scarpelli, and SVP of Product, Christian Kleinerman, will present at the Morgan Stanley Technology, Media & Telecom Conference, on Tuesday, March 7th, at 12:15 p.m. PT.

The webcasts for each event will be accessible on the investor relations section of the Snowflake website at https://investors.snowflake.com.

About Snowflake

Snowflake enables every organization to mobilize their data with Snowflake’s Data Cloud. Customers use the Data Cloud to unite siloed data, discover and securely share data, and execute diverse analytic workloads. Wherever data or users live, Snowflake delivers a single data experience that spans multiple clouds and geographies. Thousands of customers across many industries, including 543 of the 2022 Forbes Global 2000 (G2K) as of October 31, 2022, use Snowflake Data Cloud to power their businesses. Learn more at snowflake.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230201005382/en/

Contacts

Investor Contact
Jimmy Sexton
Finance Director, Head of Investor Relations
IR@snowflake.com

As protest and unrest grew in Russia and Iran over the past year, authoritarian regimes sought to crack down on civilians' internet access. These attempts were not entirely successful, in part thanks to anti-censorship tools like the anonymous web browser Tor.

For years, Tor has been a thorn in the side of censorious rulers looking to stop its citizens from freely accessing the internet, but the Russian and Iranian governments have learned its weaknesses and succeeded in blocking direct access to the Tor network at certain times.

But unlike other services blocked by these governments, Tor has been deployed alongside the traffic-channeling tool Snowflake, enabling its network to function amid efforts at censorship.

Snowflake's creator, who goes only by the one-word name "Serene(Opens in a new tab)," told Mashable in a phone interview that she expected the tool to be "helpful for people who need it," but didn't foresee just how crucial her "cool prototype" would be when it was first integrated with Tor years ago.

"Turns out last year, Putin invades Ukraine and blocks the Internet, blocks all the VPNs, and the only thing that's working is Snowflake," she said.

Now, the creator of Snowflake is branching the technology out in order to create a standalone VPN-like service called Snowstorm(Opens in a new tab) aimed at expanding open access to the internet.

Snowstorm officially launched this week, albeit as a private beta that requires an invitation. The company also announced that it has received $1 million in funding, which it has used to bring on a full-time team of developers.

"I don't think our Internet nowadays is doing what it should be doing for humans," said Serene, now also the founder of Snowstorm. "The early Internet was instrumental for me learning everything, growing as a person, becoming the best version of myself, and I want to protect that for people."

Why Snowstorm is not like other VPNs

A VPN, or Virtual Private Network, is essentially a service that hides a user's identity and internet activity while they browse.

"A VPN is just someone else's computer that you connect to first before you connect to the Internet," Serene explains. "You're getting some amount of privacy but the issue is these VPN services are...just servers in different places. Where those computers are is public knowledge. And so any state actor certainly can easily just block all of those targets."

This is why Russia and Iran were able to censor these VPN services, but not Snowflake.

What makes Snowflake different is what it's composed of: "decentralized, ephemeral, temporary proxies," said Serene.

As Serene explains it, Snowflake works thanks to a number of volunteers in free regions from all over the globe who come together to help those in censored countries. Volunteers can just leave a browser tab open and their internet connection is added to the pool of volunteer connections as a temporary proxy, which helps Snowflake users connect to the internet. To protect volunteers, Snowflake users connect to Snowflake proxies through a Tor entry node, meaning a volunteers' ISP never sees the web activity of a user and a user never accesses a volunteer's computer.

If a volunteer closes their connection, the code simply hands off the user's internet session to another Snowflake volunteer.

"Because of that, instead of just one centralized place where the VPN is being run, there's like all of these temporary proxies coming in and out of existence, which makes it very hard for a nation state to block," Serene said. "Putin couldn't block it."

Snowstorm takes this service and provides it with a huge upgrade. The system has been completely re-written for Snowstorm and users can connect directly, without using Tor (Snowflake will continue to be available for Tor users). Serene tells Mashable that Snowstorm is much faster than Snowflake. With Snowstorm, for example, users can stream high-quality YouTube videos, which was not possible on Snowflake.

Serene is realistic as to where Snowstorm currently is. After all, Snowstorm is only in private beta now and still has rounds of testing, additional upgrades, and audits to undergo. Over the phone, Serene spoke about promises of "military-grade" encryption and security that a lot of privacy companies promise and fail to deliver on.

But, Serene is aware of what Snowstorm's capabilities are. Aside from the most extreme measure of taking a country offline entirely, the technology powering Snowflake and Snowstorm has not been bested by authoritarian regimes so far.

"I'm not directly guaranteeing any particular level of privacy and I don't want to over exaggerate the privacy virtues of any particular technology," Serene explained. "But, the ensure here is that we can break censorship."