How To Play Snowflake Stock Now

The Snowflake IPO was an impressive show, so much so that it's allegedly the first IPO Warren Buffett's bought into since Dwight D. Eisenhower lived in the White House and Ford Motor Co. (F) started trading in 1956. Talk about historic.

Snowflake Inc. (SNOW)'s stock more than doubled at its debut, making it the richest, biggest company ever to pull that off. Shares started trading at $245 per share – more than double the $120 IPO price, and far above the price Wall Street was expecting (and that expectation had already been raised several times).

Now, the stock did dip to $220 on Thursday, September 17, only to climb back up to $233 mid-day Friday, but that dip hasn't stopped it from being a historic IPO. The debut left Snowflake with a value of around $70 billion. More to the point, that dip also hasn't stopped a small group of insiders, underwriters, and pre-IPO investors from boosting their net worth with the Snowflake deal. Warren Buffett alone is thought to have banked around $800 million, for instance.

Regular investors are looking at a different situation, though.

Most Investors Get Table Scraps from These Mega-IPOs

So the Snowflake IPO is significant, alright. As in, I believe it probably signifies the top of the market.

Call Snowflake "frothy," and you're understating it. Its price relative to actual earnings makes it one of the most, if not the most, expensive stocks on the market. The $70 billion-odd company (whose shares are now going for $227 apiece after falling double digits), sports a negative trailing 12-month EPS, -1.3 to put a point on it.

Shares are trading at around 100 times sales, not profits. That's a big red flag. If that's not expensive, I don't know what is. When the market rolls over -- and there are signs that it will roll over before long -- frothy, "high-growth" stocks like Snowflake are going to be the first up against the wall.

1 2 3
View single page >> |

Disclosure: None.

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.