Snowflake Stock Analysis

Netural for short term and long term.

Overview

Snowflake provides data warehouse services that “unify and analyze data with the near-unlimited power, flexibility, and concurrency today’s organizations require”. With cloud-native data platforms, its consumption-based revenue model broke the back of these laboring systems with tremendous scale, performance, and economics. Besides, it includes all kinds of SaaS services, data science tools, and data marketplace.

Source: Snowflake

Products

Cloud Storage industry

• Data Warehouse and Data Lake for ultimate data mobilization.
• Data Marketplace that allows companies to easily publish a variety of data sets that then become available for purchase by other Snowflake users.
• Vertical Data clouds for different industries (i.e. retail data cloud).

Data Analytics industry

• Tools for data engineering, data science/machine learning, data analytics and data application development.

Latest Earnings Highlights

• ➕ Q1 product revenues were $394 million, representing 84% year-over-year growth,
• ➕ launched healthcare and life sciences data cloud and the retail data cloud.d

Future Outlook

• ➕ For the second quarter, expect product revenues between $435 million and $440 million, representing year-over-year growth between 71% and 73%.
• ➕ For the full year fiscal 2023, expect product revenues between $1.885 billion and $1.9 billion, representing year-over-year growth between 65% and 67%.
• ➖ Expect on a non-GAAP basis, negative 2% operating margin on second quarter. This is worse than the first quarter.
• ➕ For the full year fiscal 2023, expect on a non-GAAP basis, 74.5% product gross margin, 1% operating margin
• ➕ For fiscal year 2029, expect product revenue of $10 billion, growing 30% year-over-year. non-GAAP basis 20% operating margin and 25% adjusted free cash flow margin.

Detailed Revenue

• Remaining performance obligations grew 82% year-on-year to $2.6 billion.
• Added 16 Global 2000 customers in the latest quarter.
• Net revenue retention of 174% includes 11 new $1 million customers
• Product revenue from customers in the health care and life sciences vertical grew more than 100% year-over-year, and product revenue from customers in the financial services vertical grew just under 100% year-over-year.

Financial Health

• Non-GAAP gross margin was 75%.
• Operating margin was 0%, benefiting from hiring linearity.
• Adjusted free cash flow margin was 43%, positively impacted by strong collections from record Q4 bookings.

➕ Catalysts

• Cloud and Data Analytics industries continue to grow rapidly.

➖ Risks

• Economic headwinds will affect Snowflake customers’ spending, especially consumer-facing cloud companies.
• Although consumption-based revenue model is easy for customers to adapt, it is also easy for companies to migrate to other platforms.

Conclusion

Netural for short term and long term

• 👍 Business: Snowflake continue to be one of the fastest-growing SaaS companies.
• 👌 Macro: Business-facing companies like Snowflake are generally more resilient than consumer-facing companies.
• 👎 Competitors: Snowflake is the leader now, but it could be challenged by either mega-size companies (i.e. Microsoft) or domain-focused companies (i.e. Palantir).
• 👌 Demand vs Supply: Although data-related software has tons of demand, supply has also grown rapidly.
• 👌 Risks: No major risks.
• 👎 Catalysts: No major catalysts either. The growth rate is expected to decline gradually as most SaaS companies.

Links:

• Investor Relations
• 2022–1 Earnings Report