What’s a Fair Valuation for Snowflake Stock?

Warren Buffet once said, “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This suggests that quality companies don’t often trade at a discount. Mr. Buffet also said that technology stocks aren’t on his radar because he only invests in what he understands, so his investment in big data company Snowflake raised some eyebrows. It implied that Mr. Buffet not only understands Snowflake, but he believes it’s a good company being offered at a fair price.

The billionaire investor’s company shelled out $250 million for about 2.1 million shares in a private placement immediately after Snowflake’s IPO. It spent another $485 million to buy 4 million shares at the IPO price of $120 from former Snowflake CEO Robert Muglia in a secondary transaction.

Credit: Markets Insider

Sure enough, the latest quarterly report from Berkshire shows 6,125,376 of Snowflake still being held by Mr. Buffet. According to the above paragraph taken from Insider, his cost basis would be around $120 a share or roughly what Snowflake’s initial public offering (IPO) was priced at. When the stock opened for trading on the NYSE at $245 in Sept 2020, it was the largest software IPO in history. Shares of Snowflake went on to trade over $400 a share until set