Posted on Thursday, August 25th, 2022 past Parth Pala
Snowflake (NYSE: SNOW)
reported earnings after-hours on 24thursday
Baronial. Shares soared over eighteen% afterward-hours equally amend-than-expected results played strongly into investor sentiment. Revenue surged by 83% to $497 million. The acquirement retentiveness rate came in at 171% meanwhile customers grew to 6800, indicating an 8% expansion from the get-go quarter. The stock is down 58% from its loftier.
Snowflake’due south business model connected to show strong quarterly results equally production revenue continued to come across pregnant uptake from consumers. The “warehouse as a service”, and a revenue, model based on usage is conspicuously working for direction. Snowflake has projected that it volition produce anywhere from $500-500 million in the next quarter, and the full-year acquirement is expected to be around $one.91 billion to $1.92 billion. Management has also indicated that the company is expected to produce a gross margin of around 75% for the year. Snowflake currently has more 240 1m+ customers.
Snowflake is clearly benefitting from a strategy that was initially implemented in 2014. At that betoken, direction decided to remove the scale, performance, and economic bottlenecks, that held dorsum its data analytics services. Snowflake’s client base continues to exist a wide range with customers ranging from financial services to healthcare, and retail.
The company likewise plans to introduce a number of primal changes moving forward, which should help it to continue to compete in the hereafter. On the earning’s call the CEO stated the following:
“ At present with massive disruption, the condition quo must modify. Our adjacent frontier of innovation is aimed at reinventing cloud application development. Our appetite is far-reaching. Our aim is to transform how cloud applications are built, deployed, sold, and transacted.”
Snowflake introduced Powered by Snowflake recently, which should aid engineers meliorate their velocity by leveraging design resources, and optimizing functioning, particularly for app developers. Powered by Snowflake now has over 590 customers and a 35% growth quarter-on-quarter. The company also plans to acquire a number of new companies such as Applica to shore up its information analytics business organisation. The acquisition should help the company ameliorate its unstructured data.
The data warehousing manufacture is expected to grow to around $52 billion by 2028 co-ordinate to projections, growing at a rate of around 11-12%. Snowflake is likely to benefit from boosted customers non only in North America but as well globally too. Within the information warehousing market place Snowflake currently has around a 20% market share. That number could increase as the company continues to aggressively innovate new products and features that assist customers improve their finish-to-end operations.
The company’s finances remained stiff for the quarter as cash flow from operating activities turned positive during the quarter, with net greenbacks from operating activities coming in at $64 million. Meanwhile, the non-GAAP operating margin came in at two%. Considering Snowflake’s run-rate, the company could be headed towards profitability on a GAAP ground in 2024. The long-term margin for the company will probably be around thirty% in one case the market settles down a bit.
Snowflake’due south stock currently trades at 33x revenue, which is quite high despite the fact the acquirement is growing rapidly. The visitor would need to maintain around 30-40% growth over the next 4-5 years, in order to justify its valuation. The stock has been trading sideways for a while and the 14-day RSI currently shows that the stock is neither overbought nor oversold. Investors remain bullish on the stock, and the current put-to-call ratio is around 0.83. But the implied volatility remains high, which would brand the stock less desirable for those looking for a steady stock.
Snowflake remains strongly placed to grow over the next few years, but questions remain well-nigh valuation. The data warehouse industry does not have many players, and the lack of competitors puts Snowflake in a strong position in terms of its ability to compete moving frontward.
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Nearly Parth Pala
Parth has been an equity analyst for over a decade, and has covered multiple global markets including the United States, Asia, and Europe. Equally an annotator, Parth brings a global perspective to his analysis, with a focus on equities that accept strong fundamentals.