SNOW - Snowflake: Favorable Setup For 2024 With Expectations Reset (Rating Upgrade)

2024-03-17 10:04:25 ET

Summary

• The fourth quarter results came in satisfactorily, with beats across the top and bottom line, as Snowflake slowed hiring and consumption trends improved.
• Specifically, the fourth quarter was an exceptionally strong bookings quarter for Snowflake, and it signed its largest deal ever with an existing customer for $250 million for next five years.
• Snowflake surprised investors with a new CEO, Sridhar Ramaswamy, brings a focus on AI and has a strong track record in the industry.
• Sridhar Ramaswamy's focus will be on the generative AI opportunity and bringing new innovation to the Snowflake at a faster pace.
• Guidance came in weaker than expected, but I am of the opinion that we will see a series of earnings beat given the low expectations set for FY2025.

Snowflake ( SNOW ) has been sold off after its earnings report, but I do think that the numbers look more de-risked today and sets the company and its new CEO up well for 2024.

I am of the view that the new CEO Sridhar Ramaswamy is the right person to bring Snowflake to the next level, while the relatively weak guidance seems somewhat conservative after considering what the management team has factored into it, and also the positive customer and consumption trends we have seen in the fourth quarter....

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