Should I Invest In Snowflake?

Yesterday, Snowflake (SNOW), one of the most anticipated IPOs in recent history, hit markets. With names like Berkshire Hathaway and Salesforce getting in on the IPO, should you be looking at SNOW as your next big investment?

Snowflake Inc. is a cloud-based data-warehousing startup that was founded in 2012, and yesterday they hit public markets. So what exactly does that mean?

What Is An Initial Public Offering (IPO)?

Well, an IPO, or Initial Public Offering, is a way for a company to raise capital in exchange for small pieces of their company called stock shares… and let’s just say that the SNOW IPO was a big one!

In fact, their IPO set a record for software companies and has been the biggest in the U.S. this year.

Originally their IPO price was supposed to be between $75-$85, but last week both Berkshire Hathaway and Salesforce committed to buying millions of shares.

Because of this, the price was then set to release between $100-$110. But when they finally started trading, it opened up at $249.99.

Within a matter of minutes it shot up as high as $319. That was over a 27% move within 3 minutes… crazy! That is what we call FOMO (Fear Of Missing Out) in the trading world. And that’s what tends to happen with IPOs.

By the end of yesterday’s trading, Snowflake (SNOW) closed up on the day 3.64%.

Snowflake SNOW 5 Minute Chart

How Did The Top IPOs Of 2019 Do?

Last year we had a few noteworthy IPOs like UBER, LYFT, CHWY and PINS. So let’s take a look how all of these different stocks performed out of the gate.

First, we’ll look at UBER. Much like Snowflake (SNOW), UBER had an explosive first day of trading. Then for about two months it basically moved sideways, until its first earnings report. From there, things got pretty ugly! In a matter of months the stock went from $43 to as low as $25.58.

UBER IPO daily chart

Now let’s take a look at their competitor, LYFT. Very much like SNOW and UBER, it too had a very volatile first day of trading but nearly immediately started moving lower. LYFT IPO’d at $87.24 in March of 2019, and by October it found a temporary bottom at $37.07.

LYFT IPO daily chart

Starting to notice a pattern yet?

Well, let’s take a look at another IPO that was really hyped last year, Chewy (CHWY). Its first day of trading was also very volatile. It opened up at $36 on its first day of trading in June of last year. By November it finally found a temporary bottom, trading as low as $21.68.

CHWY IPO daily chart

A few other great examples from last year would be Pinterest and Slack. Both acted nearly identically to the other IPOs we just discussed.

Slack was hyped up as the “Skype Killer,” and although that may turn out to be true, their stock basically went straight lower from the start.

WORK IPO daily chart

From what I’ve seen over the last few years, this has sort of been the MO of these ultra hyped IPOs.

Taking a look at you can see all the recent IPOs, and as I’m sure you’ll see, there are plenty you’ve probably never heard of before.

Will I Be Investing or Trading Snowflake (SNOW)?

So after all that discussion, should you invest in Snowflake (SNOW)? Well, ultimately that is up to you. I’m a short term trader, so I like to hold things for as little as a day or two and typically no longer than a few weeks. So for me, I will not be investing in (or trading) Snowflake.

If you’ve followed me for any length time you’ve probably heard me say:

Trade What You SEE, Not What You Think.

And for me, I don’t SEE a trade setup. Could SNOW break the mold for over-hyped IPOs and go higher with out a sharp move lower…of course! But that’s not how I approach the markets.

I stick with SRC Profits:
– Systematic
– Repeatable
– Consistent

If you invested in SNOW, I would love to hear about it in the comments.

I hope this was helpful!

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  1. Hi Marcus

    You are usually right in your assessments. I took a gamble on Snow because I believe it is a different company than most typical IPOs. However, that is a thin reason at best. 20 shares cost me about 4k. Not a lot. I decided that the market was on a down trend for the day, and it seemed to hold up ok, for the most part, considering the overall market noise. I want to see how it trades in a different market and then I will have a better idea if it was worth it. I think FOMO caught me on this one actually, but, we learn, dont we. Lets see if tomorrow is a different story. I dont like losing any money on a trade though, so you certainly gave me reasons to pause, and consider how I could have made that choice differently, such as wait and see how it actually settles.

    Good call on your part. This month I have banked roughly 30kish. Feeling ok about that but think I can do better. I have made a few trades that were riskier than I like, and the ones that I felt were just easy money, I did not really maximize my potential on those (withing my trading percentages). I mentioned before that I was trading modestly to validate the choices I make over a 6 month period. So far, (in an upward trending market) I have made 90K+, 50 of which is generated in Options and 40 in price appreciation for the shares I trade in. I only trade a basket full of names, because it is too hard to see the whole market, though I do scan most nights for new ideas.

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