The following opinion piece provides a bullet-point analysis of how 2 Light-Heavyweights 🏋️♂️ stack up 📚
Composed by Emanuele Marabella, Building Engineer and $PLTR shareholder,
Initially published on December 14, 2021, values updated on February 23, 2022.
These 2 companies are similar in nature however, I do not consider them direct competitors as their overall mission, use cases and total addressable markets are distinct. Snowflake is a cloud computing-based data warehousing company. Palantir builds software that empowers organizations to effectively integrate their data, decisions, and operations.
The Red Corner - Snowflake
78 Billion $ Enterprise Value
60% Institutional Ownership
Enterprise Value / Sales = 76
Price / Cash Flow = 1611 Snowflake founders selected the company name as it "just fit us in several ways":
Snowflakes are born in the cloud
We love the snow
Each Snowflake is unique
The Blue Corner - Palantir
19 Billion $ Enterprise Value
33% Institutional Ownership
Enterprise Value / Sales = 12
Price / Cash Flow = 63 In symbolic fashion, the company is named after a fictional artefact with limitless power, depicted in the 'Lord of the Rings', used for communication, surveillance of enemies and events, past or future. This alludes to the power of Palantir's AI technology.
A Closer Look
Snowflake's website states that the:
"founders built a data platform that would harness the immense power of the cloud. 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. Whether it’s optimizing your data architecture, deploying best practices, leveraging partner expertise, or operationalizing your modern data analytics, we can help"
CEO Snapshot
A Forbes articles states: A standout economics student at Erasmus University Rotterdam, Frank Slootman finished school a year early to pursue internships in the United States. His dream employer: IBM. In 1982, after a number of rejections from Big Blue, he “crawled ashore with $100 in my pocket”...“I learned from that experience that I don’t want to be in an elevator that’s going down. It doesn’t matter how good you are or how bad you are—in the wrong elevator, you’re going to get hosed.”
Palantir's website declares:
"We believe in augmenting human intelligence, not replacing it. With good data and the right technology, people and institutions today can still solve hard problems and change the world for the better. We have proven products and an engineering mindset. We are engineers on a mission."
CEO Snapshot
Alexander Karp holds a Doctor of Law degree (Juris Doctor, JD) from Stanford, and a Ph.D. in neoclassical social theory from the Goethe University in Frankfurt, Germany. Karp met Palantir cofounder and billionaire Facebook investor Peter Thiel while at Stanford Law School.
The Metrics Matchup
SNOW outperforms PLTR in the following 2 metrics:
Revenue YoY : SNOW 109% over PLTR's 41%
Revenue FWD : SNOW 96% over PLTR's 33%Forward Revenue is revenue that will be received in the future. It is the total revenue generated from the sale of a product or service that occurred in an earlier accounting period.
PLTR outperforms SNOW in the following 2 metrics:
Profit Margin : PLTR 78% over SNOW's 60%
Asset Turnover : PLTR 0.52 over SNOW's 0.17The asset turnover ratio measures the value of a company's sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue. The higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets.
Both companies measure up similarly and strongly in the following categories:
Free Cash Flow Margin measures how efficiently a company converts its sales to cash. The higher the percentage, the more cash is available from sales. A company that shows an increasing cash flow margin from year to year is certainly getting stronger with time.
Quick Ratio measures a company's capacity to pay its current liabilities without needing to sell its inventory or obtain additional financing.
Debt-to-Equity indicates the relative proportion of shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the ratio is also known as risk or leverage.
LT Debt to Invested Cap ratio shows the financial leverage of the firm. This ratio is calculated by dividing the long term debt with the total capital available of a company. The total capital of the company includes the long term debt and the stock of the company.
Contrarily, both companies measure up similarly and poorly in the following categories:
EBITDA margin measures of a company's operating profit as a percentage of its revenue. The acronym EBITDA stands for earnings before interest, taxes, depreciation, and amortization.
Return on Total Capital shows how well the company uses its money to make a profit. It can also be used as a way to measure the effectiveness of a company’s management team including their ability to convert capital into profitable investments.
Float % indicates how many shares are actually available to be bought and sold by the general investing public.
Palantir is often criticized for its poor Float %, however it is important to note that the following companies have a worse Float % : $SNOW, $DDOG, $COIN, $RACE, $ZS, $ORCL, $RBLX, $PATH, $RKL. Alex Karp responds to that "dilution" criticism here:
The Path to 20x
Palantir and Snowflake are currently in their respective "growth" phases and will continue to be criticized for their weak EBITDA margin. Fundamentally, their strong Free Cash Flow and Profit Margins will allow them to continue to expand their reach and conquer their Total Addressable Markets. This growth will be sustainable considering their strong Debt-to-Equity positions.
Palantir has a unique product and service and ultimately, their path to 20x is more clearly defined and attainable. The reason is not solely because of their large contracts with governments and military, neither is it because of their Apollo and Gotham platforms but rather it is due to their financial investments and partnerships with numerous companies and startups throughout various sectors: crypto, financial, healthcare, e-commerce, robotics, digital advertising, vehicle data, etc. These partnerships allow companies to implement Palantir's Foundry for Builders platform.
"Foundry is the connecti ve ti ssue linking analyti cs with operatio nal systems. Day-Zero companies are using Foundry to reach escape velocity. Foundry for Builders companies are wielding their data to scale and win. "
Competitors to Palantir's partners are at a massive disadvantage in their respective fields as I believe having not implemented the use of Palantir's platforms will be likened to those who have not implemented the use of the internet. The decision by Palantir to invest heavily in others will allow their true dominance to be revealed.
Supplemental Information - A helpful video on 'Foundry for Builders':
https://www.youtube.com/watch?v=tSwbsNpUofA&list=PLbT4YDBbWzXHbHgZVne3wXjeEPTuLnNgb&index=21
References:
https://www.snowflake.com/blog/behind-snowflakes-name/
https://www.linkedin.com/in/frankslootman/
https://www.forbes.com/sites/alexkonrad/2021/02/01/the-outsider/?sh=33b1b0b702db
https://www.youtube.com/watch?v=XL-WhFFrDqE&t=452s
https://www.youtube.com/watch?v=MeL4BWVk5-k
https://www.forbes.com/profile/alexander-karp/?sh=4945ef1e62b5
https://www.youtube.com/watch?v=q36Gj_UuTbE
https://www.youtube.com/watch?v=a5C7Wx4gxjY