SNOW - Snowflake: A Compelling Buy Opportunity Despite Recent Setbacks
2024-06-04 02:35:05 ET
Summary
- Snowflake's high valuation and decelerating revenue growth has contributed to its underperformance over the past year.
- Management changed its sales practices to emphasize Product revenue growth.
- The company should be a significant beneficiary of Artificial Intelligence adoption.
Since I last wrote about the data platform Snowflake (NYSE: SNOW ) with a buy recommendation on March 4, 2024, it has been a downhill ride. The stock is down 23.46% compared to the S&P 500 Index ( SPX ), down 2.86% over the same period. When the company released its first quarter fiscal year ("FY") 2025 earnings report on May 22, 2024, it mostly added to the sour investor sentiment surrounding the company. The market was disappointed that the company missed analysts' non-GAAP (Generally Accepted Accounting Principles) earnings estimates and gave disappointing updated guidance for FY 2025. The stock immediately declined 5% the day after it released those earnings.
Despite the company's near-term uncertainty, Snowflake's first-quarter performance had some positive aspects. Revenue growth shows signs of reaccelerating, beating analysts' revenue estimates by $42 million. Product Revenue also surpassed management's low-ball guidance for the quarter. Management is also optimistic about Artificial Intelligence ("AI") and other soon-to-be-released products further rejuvenating revenue growth. Wall Street analysts still give the company a Buy rating with a $204.72 price target, signaling that there are still big believers in the stock, regardless of its recent poor performance. ...
Snowflake: A Compelling Buy Opportunity Despite Recent Setbacks