SNOW - Snowflake: Sell Ahead Of Earnings (Ratings Downgrade)

2024-05-13 00:55:42 ET

Summary

• Snowflake's stock has deflated nearly 20% this year and remains down over 50% from pandemic-era highs, but further downside is likely ahead of the company's earnings report.
• SNOW is expected to report Q1 results on May 22. Read-through from other software companies suggests a disappointing quarter is likely.
• Other high-growth software companies like Palantir and Datadog have also experienced declines, indicating a challenging environment for the industry.
• The Company's net revenue retention rates are declining, while the company also continues to add more headcount and expects margin contraction this year.
• The stock is still expensive at ~14x this year's revenue estimates. I'd wait until a ~20% further dip to the $120s before buying in.

Even though AI hype has lifted many software stocks to new highs this year, many former high-flying stocks remain underwater. Snowflake ( SNOW ) is a big example here: the cloud data warehousing company has suffered all year due to slowing growth rates....

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