THE ORACLE’S ODDBALL
(SNOW), (BRK.B), (KO), (AAPL), (BAC), (AMZN), (MSFT), (GOOGL), (NET), (DDOG), (MDB)
The legendary Warren Buffett, a man who's as synonymous with cherry Coke as he is with savvy investments, has a knack for picking stocks that resonate with the American spirit.
His powerhouse, Berkshire Hathaway (BRK.B), is a treasure trove of investments that scream "USA!" from the top of their lungs, boasting big names like Coca-Cola (KO), Apple (AAPL), and Bank of America (BAC).
But, among the classic Americana, there lurks a tech unicorn that's not your typical Buffett bet: Snowflake (SNOW).
Snowflake, a cloud data platform, might not be the first thing that comes to mind when you think of consumer-driven stocks. Yet, Berkshire Hathaway has thrown $1.2 billion into this high-flyer, even though it's seen better days, price-wise.
Despite its shares plummeting 50% from their zenith, Snowflake could very well be the dark horse in Berkshire's stable, with the potential to gallop ahead in the long run.
Why the excitement around Snowflake, you ask? Well, it's all about data.
In the era of artificial intelligence (AI), where ChatGPT has become everyone's new best friend, the real MVP behind the scenes is data. Snowflake is like the Marie Kondo of data - it helps businesses tidy up their digital mess, making sure everything sparks joy... or, in this case, insights.
Imagine trying to make sense of data scattered across different cloud services like Amazon's (AMZN), Microsoft's (MSFT), and Alphabet's (GOOGL). That’s pretty much like trying to assemble a jigsaw puzzle with pieces from different boxes.
Snowflake's platform is the table that lets you lay out all the pieces, clearly see the big picture, and actually do something useful with it.
With the world becoming more digital by the minute, the amount of data we're producing is frankly crazy. It's estimated that 90% of the world's data was generated in just the last 2 years. Let that sink in.
And, this digital deluge shows no signs of abating, making Snowflake's usage-based billing model an attractive proposition for businesses looking to scale their data operations without breaking the bank.
With a net revenue retention (NRR) rate of 135%, Snowflake's appeal is evident, reflecting its capacity to grow its revenue base without needing to constantly hunt for new clients.
And Snowflake's business model is brilliantly simple yet genius: pay as you go, which means as the digital universe expands, so does Snowflake's wallet.
Financially, Snowflake is as robust as they come, with over $2.6 billion in annual revenue and a pretty 24% of that turning into free cash flow.
The market looks to be bullish on this company, with Wall Street predicting a 61% annual earnings growth.
However, let's not sugarcoat it. Snowflake doesn’t come cheap. In fact, it’s more expensive than its peers like Cloudflare (NET), Datadog (DDOG) or MongoDB (MDB).
Still, Snowflake's appeal is in its strategic moves, including securing FedRAMP authorization to engage with federal agencies, signaling its ambition to broaden its horizons beyond the private sector.
This pivot not only diversifies its potential revenue streams but also positions Snowflake as a formidable contender in the cloud data arena, potentially encroaching on territories traditionally dominated by companies like Palantir (PLTR).
The stock's current valuation might make some investors sweaty, but for those willing to bet on Snowflake's continued expansion and growth, a long-term hold could be as rewarding as finding a rare vintage in your uncle's basement.
Consider a strategy of dollar-cost averaging to mitigate the risk of its high-flying valuation. It's like adding spices to a stew; you don't dump them all in at once, but a little bit over time to get the flavor just right.
