Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

In this insight, we provide a valuation analysis of <a href="https://techcrunch.com/2020/09/08/snowflakes-ipo-could-value-it-as-high-as-24b-salesforce-and-berkshire-to-invest/" target="_blank" rel="noopener">Snowflake</a> which has set its IPO price range of $75 to $85 per share. At these prices, Snowflake's market cap would range between $20.9 billion and $23.7 billion. Snowflake could raise more than $2.7 billion in this IPO and this would be one of the biggest IPOs in the U.S. stock market this year. The valuation range is a big jump from the valuation the company received earlier this year when it was valued at about $12.5 billion (raising $479 million in its Series G funding round).It was also announced that Berkshire Hathaway will invest $573 million in the Snowflake IPO, which is likely to have a big positive impact on this IPO, especially among the value-oriented investors globally. <a href="https://www.smartkarma.com/entities/salesforce-com-inc" target="_blank" data-smartkarma-citation="entities:19124:1" rel="noopener">Salesforce.Com Inc (CRM US)</a>also plans to invest $250 million in the Snowflake IPO. The private placement investments by Berkshire Hathaway and Salesforce.com will be equal to the IPO price. For Berkshire Hathaway, it plans to purchase 3.125 million new shares of the company's Class A common stock (assuming $80 per share, this would represent $250 million) and an additional 4.042 million shares of the company's Class A common stock from one of the existing shareholders (assuming $80 per share, this would represent $323 million).<div class="content-highlight">Our valuation analysis suggests an EV of $37.1 billion, a market cap of $40.4 billion, and a target price of $145 per share for Snowflake. The IPO price range is from $75 to $85 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 70% upside to this price level. We used fully diluted shares outstanding of 278.8 million post IPO and this resulted in a target price of $145 per share. Given the strong upside, we would take this IPO deal. In fact, we are including Snowflake in our model portfolio.</div>

In this insight, we provide a valuation analysis of Snowflake which has set its IPO price range of $75 to $85 per share. At these prices, Snowflake's market cap would range between $20.9 billion and $23.7 billion. Snowflake could raise more than $2.7 billion in this IPO and this would be one of the biggest IPOs in the U.S. stock market this year. The valuation range is a big jump from the valuation the company received earlier this year when it was valued at about $12.5 billion (raising $479 million in its Series G funding round).It was also announced that Berkshire Hathaway will invest $573 million in the Snowflake IPO, which is likely to have a big positive impact on this IPO, especially among the value-oriented investors globally. Salesforce.Com Inc (CRM US)also plans to invest $250 million in the Snowflake IPO. The private placement investments by Berkshire Hathaway and Salesforce.com will be equal to the IPO price. For Berkshire Hathaway, it plans to purchase 3.125 million new shares of the company's Class A common stock (assuming $80 per share, this would represent $250 million) and an additional 4.042 million shares of the company's Class A common stock from one of the existing shareholders (assuming $80 per share, this would represent $323 million).Our valuation analysis suggests an EV of $37.1 billion, a market cap of $40.4 billion, and a target price of $145 per share for Snowflake. The IPO price range is from $75 to $85 per share and assuming the IPO is completed at the high end of the IPO price range, our target price would represent a 70% upside to this price level. We used fully diluted shares outstanding of 278.8 million post IPO and this resulted in a target price of $145 per share. Given the strong upside, we would take this IPO deal. In fact, we are including Snowflake in our model portfolio.

Snowflake IPO - Approved by the Oracle of Omaha

Headquartered in San Mateo, California, Snowflake is getting ready to complete its IPO in the U.S. in the next several weeks. Snowflake provides cloud-based data storage and analytics services and it has already raised more than $1.4 billion in venture capital since its establishment in 2012. Its last major round of private capital funding occurred in February 2020 when it raised $479 million at a $12.4 billion in valuation. Snowflake has generated a fantastic sales growth rate in the past several years. The company's sales exploded 173.9% YoY to $264.7 million in the year ended January 31, 2020. Its sales continued to surge by 132.6% YoY to $242 million in the six months ended July 31, 2020. While its sales surged, its operating loss declined from -$182.8 million in 1H 2019 to -$174.1 million in 1H 2020. This was a big achievement with operating margin declining from -176% in 1H 2019 to -72% in 1H 2020. Although the Snowflake IPO has not been as widely publicized as the Palantir direct public listing, Snowflake IPO has numerous hallmarks which could make it an explosive IPO candidate, driven by a surging sales growth, diversified customer base, excellent customer retention, and a sharp decline in operating losses as a percentage of sales. Although we do not know how Snowflake and Palantir IPOs will be priced, the initial look at their financial data suggests that Snowflake IPO could pounce on the Palantir direct public listing (DPL).

Headquartered in San Mateo, California, Snowflake is getting ready to complete its IPO in the U.S. in the next several weeks. Snowflake provides cloud-based data storage and analytics services and it has already raised more than $1.4 billion in venture capital since its establishment in 2012. Its last major round of private capital funding occurred in February 2020 when it raised $479 million at a $12.4 billion in valuation. Snowflake has generated a fantastic sales growth rate in the past several years. The company's sales exploded 173.9% YoY to $264.7 million in the year ended January 31, 2020. Its sales continued to surge by 132.6% YoY to $242 million in the six months ended July 31, 2020. While its sales surged, its operating loss declined from -$182.8 million in 1H 2019 to -$174.1 million in 1H 2020. This was a big achievement with operating margin declining from -176% in 1H 2019 to -72% in 1H 2020. Although the Snowflake IPO has not been as widely publicized as the Palantir direct public listing, Snowflake IPO has numerous hallmarks which could make it an explosive IPO candidate, driven by a surging sales growth, diversified customer base, excellent customer retention, and a sharp decline in operating losses as a percentage of sales. Although we do not know how Snowflake and Palantir IPOs will be priced, the initial look at their financial data suggests that Snowflake IPO could pounce on the Palantir direct public listing (DPL). 

Snowflake IPO - This One Could Pounce on the Palantir DPL

United States

Snowflake Inc. provides software solutions. The Company develops database architecture, data warehouses, query optimization, and parallelization solutions. Snowflake serves customers worldwide.

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Snowflake (SNOW US)

Snowflake IPO - Approved by the Oracle of Omaha

In this insight, we provide a valuation analysis of Snowflake which has set its IPO price range of $75 to $85 per share. At these prices,...

Douglas Kim

Snowflake IPO - This One Could Pounce on the Palantir DPL

Headquartered in San Mateo, California, Snowflake is getting ready to complete its IPO in the U.S. in the next several weeks. Snowflake provides...

Douglas Kim

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