It's fine to want to be like Buffett, but consider your position sizing with SNOW stock
When Berkshire Hathaway(NYSE:BRK-A, NYSE:BRK-B) CEO Warren Buffett loads up on a stock, you might be tempted to do what he does. That’s understandable, as Buffett is a legendary investor. However, there’s a red flag with Snowflake (NYSE:SNOW) that prospective shareholders must consider, so don’t over-leverage yourself on SNOW stock.
Snowflake is a cloud computing company that helps its customers, mostly business clients, store their data. As we’ll discuss in a moment, Buffett isn’t the only well-known financier with a share position in Snowflake. Nevertheless, you’ll definitely want to learn all of the relevant facts, both the good ones and the not-so-good ones, before deciding whether to invest in Snowflake.
Which Famous Investors Bought SNOW Stock?
Buffett and Citadel founder and CEOKen Griffin don’t necessarily have a lot in common, but they apparently both envision a bright future for Snowflake. Reportedly, Buffett owns a whopping 6,125,375 shares while Griffin’s firm holds 838,521 shares of SNOW stock.
The problem is, there’s no way to know for certain exactly why Buffett and Griffin bought Snowflake shares. After all, 13-F filings only reveal the what and how much, maybe the when, but never the why.
We’re all certainly free to make educated guesses, though. I suspect that Buffett and Griffin want exposure to artificial intelligence (AI) technology. HSBC (NYSE:HSBC) analyst Stephen Bersey observed Snowflake’s “global investment spend on AI.” Thus, Bersey drew a seemingly bullish conclusion:
“We see Snowflake as one of the early beneficiaries to this increase in spending as the company’s product portfolio is focused on the critical component of AI, large datasets.”
He then went on to assigned a “buy” rating and an ambitious $201 price target on SNOW stock. So now, it’s starting to make sense that financial superstars like Buffett and Griffin would want to invest in Snowflake in 2023.
Snowflake’s Slowing Revenue Growth Is a Concern
It’s actually pretty easy to build a bull case for Snowflake. Along with the AI-market exposure, investors might like Snowflake because the company has a good track record of quarterly EPS forecast beats.
Furthermore, Snowflake reported year-over-year product revenue growth of 37% in the second quarter of fiscal 2024. This might not be as impressive as it seems, though.
InvestorPlace contributor Marc Guberti caught something that I missed. Specifically, Snowflake’s aforementioned 37% revenue increase represents a “deceleration from the 48% revenue growth in FY Q1 2024, 53% revenue growth in FY Q4 2023, and 67% revenue growth in FY Q3 2023.”
That’s not a positive sign, you must admit. Moreover, I found out that there’s been some insider share selling going on. In particular, Snowflake Lead Independent Director Michael Speiser reportedly sold $89 million worth of SNOW stock shares during the past 12 months. Does Speiser know something that Buffett and Griffin don’t?
Take It Slow and Steady With SNOW Stock
I wouldn’t conclude from all of this that Snowflake is a failing business, by any means. A 37% year-over-year revenue increase is nothing to sneeze at. I only hope that Snowflake soon puts a stop to its revenue-growth deceleration.
With that red flag in mind, I recommend that prospective Snowflake investors should take it slow and steady. Scale into a position gradually by purchasing just a few shares of SNOW stock. You can always add to your stake later on, after re-evaluating Snowflake’s revenue-growth prospects.
On the date of publication, David Moadeldid not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
FAQs
That's understandable, as Buffett is a legendary investor. However, there's a red flag with Snowflake (NYSE:SNOW) that prospective shareholders must consider, so don't over-leverage yourself on SNOW stock. Snowflake is a cloud computing company that helps its customers, mostly business clients, store their data.
Does Warren Buffett hold Snowflake stock? ›
Two famous fund managers have large share positions in Snowflake (SNOW) stock. On the other hand, investors may be concerned about Snowflake's decelerating revenue growth.
Why not to invest in Snowflake? ›
Two reasons I'm still not sold on Snowflake
The high price tag isn't a deal-breaker in isolation, but it highlights the need for robust growth for an investment in this company to pay off. That growth isn't on tap in Snowflake's fiscal 2025 (which started in February).
Why is Snowflake stock down so much? ›
Snowflake predicted full-year fiscal 2025 product revenue of $3.25 billion. This guidance falls short of the analysts' consensus estimate of $3.43 billion. Bloomberg called product revenue a “closely watched measure” for Snowflake. Hence, this helps to account for the steep drop in SNOW stock.
Who is the largest shareholder of Snowflake? ›
Vanguard owns the most shares of Snowflake (SNOW). The ownership structure can impact the company's decision making, as large institutional investors may exert influence on the company's management and can also affect the company's stock price with their buying and selling patterns.
How high will Snowflake stock go? ›
Average Price Target
Based on 37 Wall Street analysts offering 12 month price targets for Snowflake in the last 3 months. The average price target is $211.26 with a high forecast of $260.00 and a low forecast of $125.00.
Is Snowflake a long term buy? ›
Snowflake can prove to be a long-term winner, despite several near-term revenue headwinds. Cloud-native data storage and analysis specialist Snowflake's (SNOW 2.74%) shares tanked 33% since the company released its fourth-quarter fiscal 2024 earnings report (for the period ending Jan. 31, 2024) on Feb. 28.
What are the problems with Snowflake? ›
Complexities arise due to differences in schema designs, data types, and storage mechanisms between the legacy system and Snowflake. Managing large datasets efficiently, optimizing for Snowflake's cloud-based features, and addressing potential data quality issues pose considerable challenges.
Is Snowflake the future? ›
This accolade from Fortune is a testament to the incredible opportunity ahead as Snowflake empowers customers across industries to more easily mobilize data and AI for business value. “In this new AI era, generative AI and large language models will reshape how we live, work and do business.
What Fortune 500 companies use Snowflake? ›
Adobe, Albertsons Companies, AT&T, Be The Match, Capital One, Deliveroo, Doordash, HP, Instacart, JetBlue, Kraft Heinz, Mastercard, McKesson, Micron, NBC Universal, Nielsen, Novartis, Okta, PepsiCo, Pitney Bowes, Siemens, University of Notre Dame, US Foods, Western Union, Yamaha, and many more.
The backtest shows that SNOW's market price has consistently been higher than its intrinsic value. This persistent overvaluation suggests the market may be overly optimistic about SNOW or that its price is influenced by factors unrelated to fundamentals. Snowflake Inc.'s market capitalization is 53.1B USD.
Why did Snowflake CEO quit? ›
"Snowflake is under pressure to step up on AI, and Slootman is more of a business leader rather than a tech leader. The selection of Sridhar Ramaswamy signals the direction the board is looking to emphasize."
Does Snowflake have any debt? ›
Balance Sheet
The company has $3.85 billion in cash and $287.98 million in debt, giving a net cash position of $3.56 billion or $10.65 per share.
What hedge funds own Snowflake? ›
The hedge funds that hold the most shares in Snowflake are Brad Gerstner, Warren Buffett and Frank Sands.
Who bought Snowflake? ›
On March 25, new CEO Sridhar Ramaswamy bought 31,542 shares of Snowflake at an average price of $158.52 per share for a total value of just over $5 million. Notably, with this purchase, the former Senior VP of AI at Snowflake now owns a stake of 0.0777% in the company.
Has Berkshire Hathaway's profits in Snowflake stock melted away? ›
Berkshire at one point had a profit of about $1.7 billion on the holding. The stake is now worth about $750 million. Berkshire would have done better investing in the S&P 500, which has returned 16% since the Snowflake IPO.
What is Buffett's favorite stock? ›
In addition to Occidental, Buffett also likes Apple Inc. (NASDAQ:AAPL), Coca-Cola Co (NYSE:KO) and Chevron Corp (NYSE:CVX).
Can Snowflake be a trillion dollar company? ›
Snowflake's market cap is currently at about $65 billion. To make it to $1 trillion by the end of 2035, Snowflake stock would have to grow by an average of just over 28% per year over the next 11 years. Admittedly, its trading history does not bode well for such gains.
Who owns Snowflake? ›
Snowflake was founded by Marcin Zukowski, Thierry Cruanes and Benoit Dageville on July 23, 2012 and is headquartered in Bozeman, MT.
