Snowflake (SNOW-N)

Growing faster than expected: total revenues +27%, product revenue 28%. They guided 8% margin expansion, and this is the story going forward. It's been volatile, but are positioned well for 2025. They announced a partnership with MSFT.

His 12-month price target is $228. Key player with the hyperscalers, but also gravitates over into the on-premises side of things.

Despite fantastic quarter, very expensive on any financial metric. PE of over 100, for 25-30% revenue growth. Free cashflow yield is very low at 1-2%. So you're really banking on earnings growth momentum continuing for the next 5-10 years. Risk from larger competing cloud players.

Cloud-based, data platform provider. Infrastructure and platform as a service. Also AI machine-learning integration. Chart shows how it's rolled over. Change in the CEO, and then the CRWD data breach. Very deep pockets, $3B in cash. Profitable, free cashflow. Never seems to lose customers. In acquisition mode. 41% haircut this year, great value. No dividend.

The CEO is doing a good job, but they aren't putting up good numbers to raise shares. They have to put in a good year ahead.

Big downtrend, trying to break it. $124 is a critical level for this stock; if it can get above, suggests that the stock will take off afterwards. If you own, definitely don't sell. If looking to buy, watch over the next month.

He'd rather pay more for a stock on confirmation that it's working, than try to catch the bottom. So here, he'd rather pay $130, than pay $119 and watch it go down to $100.

Pretty good runway from today's $127. Change in CEO. Need to give it at least one quarter, and maybe another, for earnings. Customer darling, but grew too quickly for customer service to keep up.

Just bought more Snowflake. Free cash and operating margins are well above their peers. And yes, it's an AI play. It enjoys 34% profit revenue growth. And it's hated now. An opportunity now.

Monday they announced a partnership with Nvidia to make customized AI applications for their customers.

A recent cloud summit and investor day weren't enough to turn around this stock; analysts liked what they heard but aren't confident enough that the company can move the needle soon.

EPS of 14c missed estimates of 19c; sales of $828M beat estimates of $786M. Snowflake's product-sales growth of 34% was above consensus, yet its full-year view appears conservative. Top-line acceleration in 2H hinges on the successful deployment of its own large language model, Arctic, which is much smaller than other foundational models. Competition from hyperscale-cloud providers that bundled their LLM-based analytics offerings could pressure Snowflake's pricing in the near term. The product gross-margin view downgrade by about 100 bps to 75% for the full year was driven by higher GPU-related costs. A net expansion rate of 128% in fiscal 1Q25 reflects a slowdown in the consumption of credits by its existing customer base. Remaining-performance obligation gains improved slightly to 46% as Snowflake continues to do well with renewals at large enterprise customers. Yesterday was a very strange market day, and we would not take cues from the trading on Thursday. 
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They replaced the CEO who was great. Doesn't know the new CEO well enough, and this is now a tough market for tech.

February reporting beat on earnings and revenue. But guided down on conference call, though margins hung in. Now in a good place, not many companies have such a good runway. Today at $158, 12-month target of $232.

NOW has been under tremendous pressure after the recent earnings release due to a combination of CEO replacement (effective immediately) and weak forward guidance, SNOW is now expected to grow by more than 20% over the next few years.

Despite EBIT loss (largely due to stock-based compensation), SNOW generates healthy cash flow, on the trailing twelve-month basis, they actually repurchased shares quite meaningfully to offset SBC. Valuation is not cheap, trading at 20x Price/Sales. We think SNOW’s business model is solid, but would not be in a hurry to add here given the uncertainty in the forecast and management.
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