Snowflake (SNOW-N)

They report Wednesday. They offer a great value proposition by renting out cloud computing and analytics, but it could take a long time for potential customers to catch on.

Snowflake vs. Datadog Likes them both. If shares of Datadog came down, we could see a takeover bid. Snowflake will do well over 5 years under this CEO. You could buy a little Snowflake and wait.

It's making money though shares have been destroyed. Software companies are in a tough spot now. You want to be in places like this, at least picking them over.

They reported excellent numbers last Wednesday. Shares soared 23% the next day and even rallied on Friday, when the market plunged. Almost nobody saw that super quarter; Wall Street was bearish as two analysts downgraded it to sells and cut price targets. They got it wrong, because SNOW has an unusual business model. Most cloud companies have a software-as-service model, selling subscriptions each month to use the software. In contrast, Snowflake uses a consumption-based model (not subs) charging customers how much storage they use, like a utility. That's good for customers (and Snowflake), but shareholders find it hard to predict company revenues. For SNOW's first six quarters, they had triple-digit revenue growth each time as the fastest-growing software company. Wall Street was worried about declining use if we're heading into a recession. SNOW's quarter: beat revenues by a mile, up 83% YOY, operating income was positive and not negative as expected and offered strong guidance this quarter and raised their full-year. As for a recession: SNOW customers can use more or less as they wish and pay for just that--Wall Street missed this point. Now, shares are a pricey 22x 2023 sales.

This class of stocks has been beaten down, but Snowflake has been beaten unfairly. True, it's been richly valued since it went public, but after the bell today, it released top and bottom line beats and its raised full-year forecast.

Similar to PLTR. It's companies like SNOW that will lead this market higher. Oversold, but he'd buy in stages around $160, 145, and 130. (Analysts’ price target is $290.00)

Reported a top and bottom line beat, but offered soft guidance--turbulence due to the wider economy. Shares tumbled 15% the next day, but recovered over 10% mostly because investors realized the business is strong. SNOW has strong secular growth. Shares have gradually recovered from that report/guidance.

He won't buy high-PE tech stocks even though they are bottoming, but he will trade them. He bought Snowflake calls at a March 200 strike with the stock trading at $181. The cost was 50 cents to $1, then $5 today! The stock has jumped and is now around $189. He was not disciplined--his mistake. He won't invest in these high-PE tech stocks, because they can plunge fast. He has not sold or trimmed these calls, and that is his mistake. If options trader believed tech stocks are bottoming now, they would be looking past April 1. Nobody in options is looking long term, only short.

Down 22% after hours after reporting with weak guidance It's an $80 billion company and they just guided for $23 billion. Investors got way out of hand what they were willing to pay for these cloud computing companies.

Last Thanksgiving, this was a $400 stock and right now it's been cut in half. It trades around 35x revenue--it's still expensive. It bottomed around $185 a year ago. Even with all the metrics and shares cut in half, this remains an expensive name.

You can't just buy "tech" now. You must work to find companies with logical valuations that offer earnings growth. Some tech stocks have that, some don't. The strategy playback that worked the last 5 years won't work in the coming 5 years.

Options trading Today it's sort of near its all-time highs. Today, 3,000 December $350 calls were purchased at $2.30-3.00. He loves this trade. This stock has the potential to break above $350 by week's end. He bought calls.

Why cloud computing stocks have sunk lately. In Q4, 2018, then interest rates suddenly rose, cloud stocks sank 35.5% , which was a great buying opportunity. If you bought then, those names doubled or more. Not all recovered, so buying the dip had to be selective. Unlike 2018, we have real inflation. So, a 35% decline may be the full decline of cloud stocks--but he isn't convinced, and there could be more pain. 18 of 50 cloud stocks have single-digit price-sales valuations--reasonable. Buy these that have fallen enough: Salesforce, VMware and New Relic. Trading at 8-15x sales include Coupa, Otka, Adobe. However, at 20-30x sales include Hubspot and Crowstrike, which are still too high. 30-40x sales: MongoDB and Unity, for example, also way too high. Trading above 30x sales include Snowflake and Cloudflare, also way too high, though he likes names like Snowflake. Likely, there's more downside to come before we reach the Santa Claus Rally.

One of his favourite companies. It's one of the most richly valued companies he follows. If your shares have run up, take some profits.