Akre Capital sells Snoflake

[jobyts]

wondering what could be the reason for the sell. There is nothing alarming in the quarterly report. If anyone here has an insight, please share.

 

SNOW is the one of the only two stocks they have that have no positive earnings. KKR is the other one. In one of the recent interviews, they were highly positive on KKR and BAM due to their alternate asset class holdings. Are they expecting the new macro environment will be there for a long term, and hence getting rid of any no profit making businesses?

 

[RichardGibbons]

It could be because their revenue growth forecast is lowish.  A year back, they were growing the top line well over 100% annually. Last year, they did 70%.  The forecast for 2023 is about 45%.

 

There's a massive difference between 100% growth and 45% growth, particularly with an unprofitable company. The whole strategy with buying an unprofitable company with 65%+ gross margins is that the top line growth at high margins rapidly overshadows fixed costs, leading to a fast-growing, profitable business.

 

If the growth falls off, it's much harder to get to profitability (e.g. twice as long at 45% than 100%.)

[lnofeisone]

I recently had a chance to meet Snowflake's executive (not the CEO but one that is listed on their leadership team), and I have to say, I was extremely underwhelmed. Snowflake is going all in with Nvidia around their data products and is using big system integrators to drive sales (e.g., Accenture). This strategy somewhat works if one recognizes that the likes of Accenture are teaming up with Snowflake, Databricks, and just about anyone.

 

I have to say, in the market space where I work, Databricks has been outworking Snowflake in whitespaces and, in some instances replacing areas where Snowflake was entrenched for several years. 

 

I say this while being long SNOW but rethinking this position.