Company Reports

No-moat-rated Snowflake reported a mixed bag for fiscal first-quarter earnings. Revenue growth was ahead of expectations, but updated full-year guidance showed expected margins moving in the wrong direction yet again. It was encouraging that management is now looking for 24% year-over-year growth in product revenue, slightly higher than the previous outlook of 22%. However, non-GAAP operating margins are now expected to be 3% for full-year results, compared with the previous outlook of 6% and actual results of 8% last year. With slightly higher growth but lower margins for the year roughly offsetting, we do not plan to change our long-term forecasts, and we maintain our fair value estimate of $187 per share.

No-moat-rated Snowflake reported decent fiscal fourth-quarter earnings. However, the company’s outlook for fiscal 2025 was disappointing. This, combined with the surprise retirement of the company’s CEO, Frank Slootman, created a challenging quarter for Snowflake, and investors are never thrilled with a surprise CEO succession. Slootman will be replaced by Sridhar Ramaswamy, who has only been with Snowflake since May 2023. As we factor in slower growth than we were previously expecting, driven by the disappointing outlook, we are lowering our fair value estimate to $187 from $231. We thought shares were fairly valued heading into today’s earnings, and based on the drop in share price of roughly 20% afterhours, our updated fair value estimate implies shares are fairly valued once again

In just over 10 years, Snowflake has culminated into a force that is far from melting. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, including hefty data transformation costs, breaking down data silos to create a single source of truth, and creating scalable performance. Snowflake seeks to address these issues with its platform, which gives its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

Snowflake’s third quarter was a mixed one, in our view, as revenue came in above our expectations while the bottom line came in under, as we had rosier expectations than the market. Encouragingly though, full-year fiscal 2024 guidance was raised on the revenue and profitability front. Shares have popped 7% upon results, inching the stock somewhat closer to our $231 fair value estimate, while still leaving room for ample upside as the stock remains in 4-star territory. Overall, we can’t stress enough to investors that Snowflake is extremely well-positioned to benefit from a world that is rapidly collecting more data, which requires a place to live, but also a playground like Snowflake’s to work with such data so as to extract more value. While these are passive tailwinds, we think Snowflake’s technical expertise and execution will make it more than just a passive beneficiary in the data management software space. We still believe the name is a top pick under our technology coverage.

Snowflake’s second quarter was a solid one, as revenue came in line with our expectations and GAAP EPS was slightly below our forecast. However, we baked in rosier expectations on the top and bottom line than consensus. As a result, shares are up 3% upon results due to the bigger beat relative to consensus. While we have moderated our expectations for the remainder of the year as we bake in continued consumption stabilization as seen in the quarter, we think Snowflake will see top-line reacceleration next year—as several new offerings will be released soon (including containerized services). We are maintaining our fair value estimate of $231 per share for no-moat Snowflake and we believe ample upside is still very much on the table, making Snowflake a top pick in the technology sector, in our view. Altogether, we believe the market is significantly discounting Snowflake's potential by underestimating three key areas: datasphere (total data in existence) growth, how differentiated Snowflake's technology is, and the powerful potential of Snowflake's small but mighty data marketplace. We think Snowflake’s consumption model spooks the market but we think switching costs inherent in the data storage space don’t need a formal subscription model to reap value.

Snowflake is one of our top picks in the technology sector, as we see an attractive long-term investment opportunity in the no-moat firm implied in our $231 fair value estimate and our 4-star rating. We believe the market is significantly discounting Snowflake's potential by underestimating three key areas: datasphere (total data in existence) growth, how differentiated Snowflake's technology is, and the powerful potential of Snowflake's small but mighty data marketplace. This leaves a meaty opportunity for investors, in our view, thanks to what we believe is a lack of understanding of this complex space.

We are lowering our fair value estimate for Snowflake to $231 per share from $258 as the firm began its first quarter with a chill that we think has implications for the long term. While revenue exceeded our expectations, EPS came in under our forecasts. Guidance for the year was moderated as existing customers are slowing spending growth, which is informing our fair value cut, as we think this will moderate longer-term growth. On the flip side, while bookings continued to see headwinds due to conservative, shorter-term commitments, we were encouraged that this was not the result of competitive dynamics. We believe that shorter-term commitments due to the macroenvironment will likely not diminish customers’ total commitments significantly in the long term, as we believe Snowflake’s product has very sticky beginnings reflected in an outstanding net revenue retention rate of 151%. So, all in all, while we have moderated growth expectations in the long term, we believe existing customer spending is safeguarded and sticky. Even with our fair value cut, we believe Snowflake shares are attractive. We remind investors that no-moat Snowflake boasts differentiated technical abilities in the data lake and warehouse markets with ample upside from its currently small but mighty data marketplace offering.

In just over 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

No-moat Snowflake had a mixed quarter, beating our top-line estimates slightly while coming in under our earnings per share forecast. Guidance for the year was conservative, as Snowflake stressed its customers’ cautious spending trends at this time. As a result, we are lowering our fair value estimate for Snowflake to $258 from $295 per share. While we have baked in less growth in the near term based on the macroenvironment, we are still convinced Snowflake boasts incredible opportunity to come, with particular upside from its data marketplace—which only accounts for a small portion of revenue at the moment. We continue to believe Snowflake stock is attractively priced for the long-term investor who is looking to get high-quality exposure to the nascent and booming data lake and data warehouse space, which we believe is moaty by nature. Altogether, we think the market is too heavily discounting the early mover advantage Snowflake has, which implies a snowball effect to market size, in our view.

In just over 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

In just over 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

Snowflake’s third quarter experienced an unexpected snowfall, as the company beat revenue and non-GAAP EPS FactSet consensus. However, product revenue for fiscal 2024 is lighter than we had expected, bringing a chill with results, which contributed to shares falling about 5% in after hours to around $135 per share. Despite the weaker product revenue expected in the next fiscal year, we remain confident that Snowflake will be able to bounce back once through the worst of this macroeconomic environment. Consequently, we maintain our fair value estimate of $295 per share for no-moat Snowflake. This leaves Snowflake shares in attractive 5-star territory and investors with a compelling buy opportunity, in our view. As a reminder, while we do not give Snowflake a moat rating at the moment, we see early signs of moaty stickiness, as reflected in a stellar 165% net revenue retention rate.

Snowflake’s second quarter was an excellent one, as revenue and GAAP EPS came in well above our expectations and management’s due to a snowballing effect which has Snowflake making traction upmarket. We think such success lies in the ease of setting up and trying out the Snowflake platform, which involves little upfront costs due to the company’s consumption model.

No-moat Snowflake started its fiscal 2023 with a storm. Results nicely topped our in-house expectations as revenue surged and operating losses as a percentage of sales tapered off faster than we expected. As guidance slightly increased for fiscal 2023, we believe the market's after-hours reaction of shares plummeting 13% is unwarranted. We think that the sequential decline of remaining performance obligations was a catalyst for the sharp sell off. Nonetheless, we are not discouraged by the movement, as the previous quarter had outperformed bookings—leading to a tough compare. As a reminder, Snowflake's model is a consumption-based one, opposed to a SaaS model, but we do not believe that hampers switching costs, as we think that data lake and warehouse software is naturally very sticky, and thus, does not require formal contracts to lock in customers.

No-moat Snowflake finished 2022 with a mixed quarter, delivering impressive net revenue retention rates and beating our top-line growth, operating margin, and GAAP earnings per share estimates. Encouraging results were contrasted with a more conservative outlook than the market was expecting, which led to the stock plummeting by over 20% after hours. The conservatism was a result of the fact that Snowflake's revenue model is consumption based and thus harder to predict. Nonetheless, we are confident that Snowflake's future after 2023 will be strong--because even though a consumption model does not formally lock in revenue for a set amount of time (like in a subscription model), switching costs act to invisibly create lock-in in such models--and we see Snowflake as exhibiting strong roots of this moat source (as seen in its outstanding net revenue retention figures). In addition, the moderate outlook was much closer to our former forecasts than the market's, leading us to maintain our fair value estimate for Snowflake at $295 per share. This places Snowflake in 4-star territory, making it an attractive buy, in our view.

In the past 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

In the past 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.

Snowflake’s third quarter was an outstanding one, as the company surpassed FactSet consensus on its revenue guidance. Snowflake cautioned that the magnitude of its beat was unusual and shouldn't be expected in the future--as the outperformance was a result of surprising upside manifested from some of its largest, most mature customers. These surprises were disclosed as more one-time in nature and might lead to more moderate future customer growth rates. As a result, we are maintaining our fair value estimate of $295 for no-moat Snowflake. Shares are up 14% after-hours to around $353 per share, which still leaves Snowflake in 3-star, fairly valued territory.

We are raising our fair value estimate for no-moat Snowflake to $295 per share from $234 per share, as we’re even more optimistic about the overall database management systems, or DBMS, market and Snowflake’s ability to accumulate additional share. We believe the DBMS market can grow to $243 billion by 2030, marking a 14% 10-year CAGR, which is an acceleration for the market's historical 11% 10-year historical CAGR. Meanwhile, we think Snowflake’s revenue will grow at a 44% CAGR over the same period. Our in-house forecasts for the overall DBMS market are based on our estimates for overall expansion of the global datasphere--or total amount of data in existence.

In the past 10 years, Snowflake has culminated into a force that is far from melting, in our view. As enterprises continue to migrate workloads to the public cloud, significant obstacles have arisen, compromising performance of data queries, creating hefty data transformation costs, and yielding erroneous data. Snowflake seeks to address these issues with its platform, which gives all of its users access to its data lake, warehouse, and marketplace on various public clouds. We think Snowflake has a massive runway for future growth and should emerge as a data powerhouse in the years ahead.