Snowflake vs. Palantir: Explained! | Which is the Better Buy? SNOW or PLTR Long-Term? Or Both?

as promised here's a comparison between snowflake and palantir from snow's website here's a description of their beginnings snowflake's founders started from scratch and built a data platform that would harness the immense power of the cloud but their vision did not stop there they engineered snowflake to power the data cloud where thousands of organizations have seamless access to explore share and unlock the true value of their data so essentially snowflake and palantir are making big data happen what immediately sets them apart their perspective valuations and public recognitions warren buffett and berkshire hathaway led snow to a smashing debut after all buffett has been able to thrive in all sorts of market environments and economic conditions by adapting his investing strategy over time in my eyes berkshire's interest in snowflake is a validation of the company's product and potential the fact that buffett was willing to pay such a high multiple on this business indicates that berkshire believes the company's performance will eventually justify the valuation the ipo price was initially set for 75 upped to 120 and then opened at 245 one of the craziest ipos i've ever seen and i have to attribute that to buffett's early stage involvement as an investing legend palantir on the other hand had no such ipo celebration and there was a period of time when the stock fell below the offering price for a few weeks that you could find almost nothing positive about the company perhaps except for my overly optimistic videos saying that i was buying pallets here under 10 when we got confirmation of arc invest's involvement it's been all uphill since then back to snowflake i'm going to play some clips from analysts and the ceo talking about the company listen to how they talk about growth and try and think about what we've talked about with palantir's perspective growth in that regard snowflake went from being something that was incredibly exciting to be something that felt like a top for a lot of people can tell you david is is that it's absurd versus its own group versus its own group remember zoom is the fastest growth zoom also they're about similar growth but guess what zoom is incredibly profitable right and zooms it 50 times a lot of people felt that the underwriters did a bad price they priced at zoom levels zoom's the most expensive company in the market until snowflake thing all i could say is is that snowflake is too difficult to understand for the people who bought the stock and frank slootman is so great biggest software ipo ever at 120 a share right now we're at what 275-ish you're the market cap above the market cap of vmware which started with virtualization and broadened out considerably is snowflake's story going to be even broader than the one you told in the prospectus um well you know we stick to what we uh obviously what we said in the in the perspectives but i think in the perspectives you know we we laid out as best we could you know what we think is the the full potential and and scope of this opportunity and uh you know we talked all week to investors about you know what what the full uh ambition is uh of this company and obviously you know people are excited about that they want to be part of this journey and sort of sort of brings us to where we are today tell me how you're measuring uh success over the near and even medium term is profitability even a thing that you should be talking about that investors should be thinking about or are you primarily focused on growth and on product well we are primarily focused on growth but what we're not focused on is what people refer to as growth at all costs and you can see in our numbers you know over the last year certainly since uh mike scarpelli and i joined the company that we have significantly bended the curve uh we're driving up our unit economics uh our girls margins and our operating efficiency uh in every uh part of uh those expenditures is going up in leaps and bounds as well and you can see in sales and marketing as a percentage of revenue it's coming down uh very very fast and uh you know we're focused on that but we think that a lot of leverage in the model will come from sales and marketing that's just the type of business that this is yeah are amazon microsoft and google dangerous to you as they try to do some of the things that you do in their own clouds what would you say to investors who are concerned about that and wonder about the the true legs of this multi-cloud story collectively as an industry you know sometimes we partner sometimes we compete uh competition is not bad you know what makes all of us better the customer benefits can't sort of make too much of the fact that you know sometimes it gets pretty intense out there in the marketplace doug can you kind of start by telling people why snowflake is such a valuable asset in general here i think over the last decade we've heard so much about this trend toward big data and the next evolution in our opinion of big data is really big data management because the point of big data is to create intelligent software it's to create incredible experiences for users and it's really the precursor to ai and what snowflake does i think why people are really excited about it thematically is it is sort of that bridge in our opinion from big data to more intelligent software they help companies essentially architect their data more intelligently in the cloud who are the rivals in this space how much of a lead does snowflake have how much of a moat does it have to use the berkshire language so i think really when i think about their competition some of their biggest competitions are actually the companies they work with the cloud providers themselves aws google microsoft with azure those are the ones that i would be most focused on certainly there's other ones in the market like a hadoop there's other companies that are sort of i'd say in the same game in the same league companies like databricks which is a private company still but i do think that if i were an investor in snowflake i would be focused more on those big cloud providers trying to expand their capabilities and sort of shutting snowflake out of the market as we know amazon loves to go down the balance sheet and turn every cost center into new revenue items so snowflake would appear to be a candidate for that what's its valuation right now doug at about 245 dollars this morning right about its ipo price what are we talking about in terms of the multiple on revenue and and does it generate earnings it doesn't generate earnings yet i think in in our rough estimate it's somewhere around 70 times next year's revenue so as lilly said that would make it even at the time of the ipo i think it was one of the most expensive software companies in the market and now i think it is far far and away one of the most expensive companies in the software market we are uh cautious here the valuation i think is rich so over the next six to 12 months i think we're going to see more volatility in the name and i think long-term investors might get another chance at a more attractive valuation okay i find it interesting that they don't bring up palantir at all during these discussions maybe these two companies aren't directly competing in the traditional sense but there is definitely some overlap there i'd like to get your thoughts on if they are competing for clients palantir's got the government and some more businesses as kind of a fallback for them i would like to see them get a much more commercial side to their core business whereas i think snowflake at this point has a much more commercial side to them i believe the investing community has yet to realize palutear on a large enough scale yet but i do believe pltr will be in the same conversation as snowflake a year from now now on to the charts snowflake has yet to report its q3 results so that won't show up here but we do have pltr's fiscal third quarter numbers to show all right here is the comparison for revenue we have palantir and then snowflake this is the revenue segment just to start off palantir is much higher in terms of their revenue that they are generating each quarter we'll have to see what snowflake is able to put out for the third quarter of 2020 since they have not reported yet and it looks like snowflake may be growing at a higher rate than palantir but i just see palantir with these big government contracts that kind of makes them a more valuable company in my eyes at this point look they've got the growth it's still there maybe snowflake has higher growth i haven't looked at the percentages but palantir actually has higher numbers at this point let's move on to gross profit again palantir bringing in much more gross profit and pounds here you'll see them dropping below that's because of all their fees associated with the listing because they did a direct listing some pretty impressive growth from snowflake but again pounce here is just significantly higher already all right moving on to operating expenses yeah this is going to be the outlier from palantir here because they're listing they used a lot of stock based compensation it looks like snowflake is almost spending half as much in terms of operating expenses historically i guess there's not too much to worry about here so it'll be interesting to see how both of these companies treat the operating expenses going forward i would like to see snowflake for q3 and then maybe how palantir does in q4 see if they're able to work it down even more i would hope palutear would be able to return to the 300 million dollar range instead of the almost a billion dollars that they were going through in q3 because of the listing and in terms of snowflake i think they should be able to drop it maybe closer to 100 million dollars that is if they're not spending heavily on r d and if their core business just really pumps out a lot of cash all right moving on to the operating income again q3 an absolute outlier for palantir and you'll see again they're pretty neck and neck here it is a pretty fair comparison but palantir is the one generating more revenue they've got the bigger contracts snowflake is just not as competitive in that regard their operating incomes are pretty much even yes palantir is actually a little more negative if you look if we go back to how much revenue they're actually pulling in comparatively that's a little disappointing in regards to snowflake all right moving on to gross margin palantir does have a much higher margin you'll see they are pretty close and then pound here really dips down pouncer does seem to have a stronger margin at least right now but snowflake seems to be accelerating gradually you'll see from there to there to there increasing just slightly and maybe they're getting started for a massive run i would hope that palantir would be able to bounce back from this huge dip in q4 again we will see that shortly and then operating margin both looking very strong and palantir turning to a negative operating margin in q3 which is really something i did not want to see from them but you'll see snowflakes starting really low and working its way up that's a good trend for the company palantir also working its way up dipping down in q2 and then taking a huge hit in q3 so i'd like to see both companies will probably see a huge snapback from palantir in the fourth quarter both companies using their software as a service is are really going to be headed in the right direction and then moving on a profit margin same kind of trend here pretty much the same exact trend i think both of these companies are really going to take software in its best sense and really make it a value to the investors and i think that's what investors of both of these companies are excited about and that would be these companies becoming very profitable in the future so how do you feel about snowflake when comparing them to palantir personally i like palantir more as a strong growth play at this point snowflake seems just a little too richly valued but that's not always a bad thing what do you think if you had to what stock would you bet on i think both are headed up and will get a good sense of the trajectory of both stocks over the next year are you invested in pltr in snow leave a comment like if you do subscribe if you're new an avalanche of content is on the way until next time

Channel: The Investing Opportunity

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Keywords: palantir stock, palantir, snowflake stock, pltr, snow stock, snowflake vs palantir, palantir snowflake, palantir vs snowflake, snowflake palantir

Id: nhbZLBYK1_0

Length: 11min 46sec (706 seconds)

Published: Sat Nov 21 2020