Big data planted its roots with the rise of smartphones and social media platforms, but its growth has seemingly taken an exponential turn over the past few years.
The global big-data analytics market was valued at around $271 billion in 2022. This year, it's expected to hit over $307 billion, with estimates of a $745 billion market size by 2030. That's a compound annual growth rate of around 13.5%.
This is good news for Snowflake (SNOW 1.06%) and its investors because the company stands to gain directly from the growth and increasing necessity of big data. Its stock performance since going public in September 2020 has been lackluster, but there's still marking-beating potential.
NYSE: SNOW
Key Data Points
Snowflake has been adding customers at a nice rate
Snowflake is a data warehousing platform that allows its users to process, store, and analyze tons of data across multiple platforms like Amazon Web Services, Microsoft's Azure, and Alphabet's Google Cloud. It might seem straightforward in nature, but managing vast amounts of data across platforms in a scalable way is no small feat.
Snowflake has managed to streamline this process better than most of its competitors, and it seems prospective customers are catching on to the platform's effectiveness. At the end of its 2020 fiscal year's third quarter, Snowflake had 1,934 customers. A year later, it had 3,554 customers. By the second quarter of its 2024 fiscal year (ended July 31), it had 8,537.
Not only has Snowflake attracted customers at an impressive rate, but it has also brought on high-paying ones. The number of customers that spend at least $1 million grew 62% year over year to 402 this past quarter.
Snowflake will benefit from the network effect
Besides the obvious effect on revenue, its customer growth is crucial because it adds to the network effect it stands to gain from, particularly with its Snowflake Marketplace.
Snowflake Marketplace allows users to sell and purchase a wide range of data, data services, and apps native to Snowflake from top companies globally. Picture an Amazon-esque marketplace, except centered on data.
As of July 31, Snowflake had 2,149 listings on its marketplace, up 13% from the previous quarter and almost 40% year over year. As the number of consumers and data providers on Snowflake Marketplace grows, there's an incentive for incoming consumers and data providers to use the platform because the depth and variety of data increases.
This creates a cycle where the platform becomes more valuable, which should spark continued growth. The bigger the Snowflake data-sharing ecosystem grows, the more that businesses miss out by not being a part of it.
An attractive entry point for investors
Snowflake had its initial public offering in September 2020 priced at $120, but opened trading at $245. At current prices, its shares are about two-thirds of its opening price, giving it an attractive valuation for long-term investors.
SNOW PS ratio data by YCharts.
With a price-to-sales ratio of just over 21, it's not a great value, but it does put it in a position to produce market-beating results if its stock trends in the way its revenue is projected.
Snowflake's revenue growth has recently slowed, but that's not surprising given macroeconomic conditions. Many top-tier software companies have experienced slowdowns because of factors like rising inflation and interest rates. Still, Snowflake managed to grow revenue 36% year over year to $674 million in its 2024 second quarter.
Despite near-term slowdowns, Snowflake is holding on to its projection that it will hit $2.6 billion in product revenue at the end of its current fiscal year and $10 billion by the end of its 2029 fiscal year. Whether it accomplishes this, the company is building an impressive data cloud ecosystem that I wouldn't bet against right now.
