Snowflake inventory (NYSE: SNOW) has rallied by nearly 36% from its lows of about $190 per share seen in mid-Could. The rally comes on the again of a extra constructive outlook from brokerage analysts and the strong Q1 FY’22 earnings, which noticed the corporate report a 110% year-over-year progress in product revenues. Nonetheless, with the inventory now buying and selling at over $250 per share or about 69x consensus 2022 revenues, does it nonetheless stay enticing? We worth Snowflake inventory at about $230 per share, barely under the market value, because of near-term dangers resembling rising inflation and the Federal Reserve’s more and more hawkish stance.
Nonetheless, the inventory ought to nonetheless stay wager for traders with a long-term view. Cloud-based information warehousing is clearly the long run, as companies proceed emigrate from on-premise methods to the cloud, which is more cost effective and scalable. Snowflake, which is seen as a know-how chief within the area, is getting extra bullish about its long-term prospects. Throughout its first analyst assembly as a public firm, held in June, Snowflake upped the scale of its estimated addressable market from $80 billion to $90 billion. Furthermore, the corporate outlined that it was focusing on $10 billion in annual product income by fiscal 2029 (FY ends January). This interprets right into a compounded annual progress fee of about 35% over the following seven years, which means that the corporate ought to steadily develop into its premium valuation within the coming years.
See our interactive dashboard evaluation on Snowflake’s Valuation for extra particulars on the corporate’s income, progress, valuation, and comparability with friends.
[6/8/2021] Snowflake Inventory Updates
Snowflake inventory (NYSE: SNOW) has rallied by about 30% over the past month or so, rising from all-time lows of about $190 per share. There are a few components driving the current good points. Firstly, sell-side analysts turned broadly extra constructive on the inventory following the correction, and it’s also seemingly that traders, who have been beforehand on the sidelines, started seeing worth within the inventory. Furthermore, Snowflake additionally revealed a stronger than anticipated set of Q1 FY’22 earnings towards the top of Could, noting that its product revenues soared 110% year-over-year to $213.eight million, topping steering of $195 million to $200 million. We known as Snowflake inventory a stable purchase again in early Could when it traded at ranges of underneath $200. (see replace under) So does the inventory stay promising at present ranges of round $250 per share?
Snowflake inventory trades at a comparatively excessive 65x projected FY’22 income. Nonetheless, we nonetheless suppose the inventory nonetheless has lots going for it, contemplating that Cloud-based information warehousing is clearly the long run, as organizations proceed to transition from on-premise methods to the cloud, which is more cost effective and scalable. Snowflake’s providing is seen as greatest at school, providing extra flexibility in comparison with rival merchandise from Amazon, Google, and Microsoft. Revenues are projected to develop at round 85% this fiscal 12 months and by about 65% for subsequent 12 months, per consensus estimates. Longer-term progress must also maintain up, as Snowflake estimates its complete present addressable market at over $80 billion. That’s about 70x its projected FY’22 gross sales. Though Snowflake would require a while to develop into its premium valuation, the inventory might be value a glance, because it nonetheless stays down by about 35% from its all-time highs.
[5/11/2021] Snowflake Inventory Seems Like A Stable Purchase
Snowflake inventory (NYSE: SNOW) has declined by about 13% over the past week, pushed by the broader sell-off in know-how shares, as traders continued to re-allocate to cyclical and worth shares that are inclined to outperform throughout an financial restoration. Excessive a number of names resembling Snowflake, have been notably badly hit with the inventory now down by about 50% from the all-time highs seen in December. So is Snowflake inventory a purchase at present ranges? We predict it’s for a few causes.
Snowflake’s ahead P/S a number of has declined from about 100x a couple of months in the past to about 50x at the moment, even supposing the basic image for the corporate has hardly modified. Cloud-based information warehousing is clearly the long run, as organizations transition from storing information on on-premise servers and expensive {hardware} to cloud-based choices which might be more cost effective and scalable. Snowflake is especially nicely positioned within the area, as its product works throughout cloud platforms and likewise separates storage from computing for billing functions. This displays in Snowflake’s efficiency, with the corporate constantly doubling revenues over the previous few years. Gross sales are additionally projected to develop by about 85% in FY’22 (fiscal years finish on January 31) to about $1.1 billion per consensus estimates. Contemplating that the corporate had a contract backlog of round $1.Three billion as of This autumn FY’21, it’s seemingly that it ought to comfortably meet these estimates. There seems to be much more room for progress in the long term. Snowflake estimates its complete present addressable market at about $81 billion, over 70x its projected FY’22 income. Snowflake’s enterprise mannequin can be consumption-based, somewhat than being mounted charge, in contrast to many different SaaS names, giving the corporate’s plenty of upside as information and question volumes rise for patrons. See our interactive dashboard evaluation on Snowflake’s Valuation for extra particulars on the corporate’s income, progress, valuation, and comparability with friends.
[3/8/2021] Snowflake Inventory Is Higher Worth Following This autumn Outcomes, Current Promote-Off
Snowflake (NYSE:SNOW) revealed a stronger-than-expected set of This autumn 2021 outcomes final week (FY ends January), with income rising by about 117% to $107.6 million, pushed by continued robust uptake of the corporate’s cloud-based information warehousing options. The corporate additionally offered steering for FY’22, projecting $1.00 billion to $1.02 billion in product income, translating right into a progress fee of as a lot as 84% year-over-year. The corporate’s remaining efficiency obligations (RPO) – or the quantity of future income that has been contracted by prospects however not acknowledged – grew greater than 3x year-over-year to $1.Three billion.
Whereas Snowflake’s progress outlook stays stable, is the inventory purchase? In all probability. Though Snowflake continues to be valued at a comparatively wealthy 62x consensus 2022 revenues, the inventory has corrected by about 20% over the past month and is down by near 39% from its publish IPO highs, buying and selling at ranges of round $240 per share. Snowflake can be prone to develop into its lofty valuation comparatively rapidly. The corporate’s addressable market is massive at $81 billion and Snowflake’s product additionally has a number of benefits over rivals, together with being platform agnostic, whereas additionally separating storage from computing. Individually, the post-IPO lock-up-related overhang on the inventory can be prone to ease, as the corporate’s third and last lock-up expired following This autumn outcomes. Now, there are most likely cheaper methods to play the cloud-based information warehousing area. As an illustration, legacy database and analytics main Teradata has made plenty of progress with its personal cloud-based product. (see our replace under) Nonetheless, Snowflake’s stable product, execution, and up to date correction make the inventory a comparatively compelling decide.
[2/17/2021] Teradata: Snowflake On A Price range?
We predict that Snowflake (NYSE:SNOW), a supplier of cloud information warehousing options, is considerably overvalued in comparison with Teradata (NYSE:TDC), an organization that gives database and analytics software program. Snowflake has a market cap of about $82 billion, valued at about 75x ahead income, whereas Teradata’s market cap stands at simply over $5 billion, or at about 3x ahead revenues. Does this hole in valuation make sense? We don’t suppose so. Positive, Snowflake is the most popular title within the cloud information warehousing area, which is in favor with traders, and its revenues are rising sooner, however there’s extra to this story. Whereas Teradata is mostly related to on-premise databases, it has made higher than anticipated progress with its personal cloud-based product. We predict that might change within the narrative surrounding Teradata, doubtlessly enabling the inventory to be re-rated by traders, closing its valuation hole with Snowflake. Let’s take a more in-depth have a look at the 2 corporations’ monetary efficiency, cloud information warehousing merchandise, and valuations to seek out out extra. Snowflake Vs. Teradata: SNOW Inventory Seems Overvalued In comparison with TDC
Revenues Progress & Margins
Snowflake’s revenues are on monitor to develop at an annual fee of over 140% between FY’19 and FY’21 (fiscal years finish January) as demand for its cloud-based product has soared. FY’21 revenues are anticipated to face at roughly $580 million, per consensus estimates, when the corporate stories its outcomes through the first week of March. As compared, Teradata has seen revenues decline from round $2.2 billion in 2018 to about $1.eight billion in 2020, as its on-premise warehousing mannequin confronted competitors from Cloud-based gamers. Nonetheless, Teradata is worthwhile, with its adjusted working margins standing at about 13% final 12 months. Whereas these aren’t nice margins for a know-how firm, they’re nonetheless higher than Snowflake, which stays deeply loss-making.
Teradata’s Progress In Cloud Information Warehousing
Whereas Snowflake has been greater than doubling its enterprise yearly, Teradata’s cloud operations are additionally gaining stable traction. Particularly, over This autumn 2020 the corporate stated that the annual recurring income (ARR) – which is the annual worth of all recurring contracts as of This autumn – for public-cloud-based providers grew to $106 million, a 165% soar year-over-year. Very similar to Snowflake, Teradata’s product can be cloud-agnostic and works throughout the most important public clouds from Amazon, Microsoft, and Google. The corporate additionally has a big set of current prospects that it will probably doubtlessly promote its cloud-based providing to. In actual fact, within the firm’s earnings name, it indicated that it was successful some prospects away from Snowflake. General, Teradata expects public cloud ARR to extend by at the least 165% year-over-year in Q1 2021 and expects to at the least double ARR year-over-year for 2021.
Why The Valuation Hole May Slim
Let’s come again to the valuation. If we have been to worth Teradata’s cloud enterprise alone by making use of Snowflake’s present 75x income a number of to its $106 million run fee revenues, the enterprise section can be valued at about $eight billion – excluding Terada’s worthwhile legacy companies, which nonetheless account for over 90% of its income. Nonetheless, Teradata’s complete present market cap stands at nearly $5 billion. Which means that the corporate ought to have the ability to unlock worth from the cloud enterprise because it continues to report robust progress within the coming quarters. General, we expect Teradata inventory appears to be like like a greater wager in comparison with Snowflake at this juncture, given its decrease valuation and value danger, and the potential upside from its cloud enterprise. We predict that the distinction in P/S a number of of 75x for Snowflake versus underneath 3x for Teradata will seemingly slim going ahead, implying higher returns for Teradata inventory.
[1/22/2021] Is Snowflake Inventory A Purchase?
Snowflake (NYSE: SNOW) inventory trades at ranges of round $286, down by roughly 26% from its December highs pushed partly by a partial lock-up expiration, which allowed staff to promote a portion of their vested choices, and a few sell-side analysts turning cautious concerning the firm’s valuation. Snowflake inventory now trades at about 75x projected FY’22 Income (FY ends January), nicely above the broader Web software program sector buying and selling at a P/S a number of of about 15x. Nonetheless, hyper-growth names resembling Snowflake can’t be valued primarily based on multiples alone and traders want to have a look at the corporate’s broader story and its potential to drive long-term progress.
Our interactive dashboard evaluation of Snowflake’s Valuation offers extra particulars on the corporate’s income, progress, and valuation.
Snowflake sells database warehousing software program – utilizing an identical commonplace supplied by on-premise gamers resembling Oracle – designed particularly for the cloud. This mannequin affords much more flexibility and scalability, with pricing additionally being variable, primarily based on consumption. Snowflake’s Revenues are projected to double in FY’21 to about $580 million and develop by nearly 90% subsequent 12 months, per consensus figures. There’s good cause to imagine that Snowflake can proceed to publish excessive ranges of progress going ahead as nicely. Firstly, the addressable market is massive at $81 billion, per Snowflake’s estimates. Contemplating that consensus Income estimates for 2022 stand at simply round $1.1 billion, the corporate has loads of room for progress. Whereas there are different rivals on this area, together with Amazon’s Redshift, Microsoft’s Azure Synapse, and Google’s Large Question, Snowflake affords robust product differentiation. Snowflake’s mannequin works throughout totally different cloud platforms. Snowflake additionally separates storage from computing, enabling every to scale up or down independently, giving customers higher flexibility and price financial savings. Snowflake can be apparently simpler for patrons to make use of, with out the necessity for a devoted database administrator.
The low-interest-rate surroundings is inflicting traders to take a longer-horizon view with shares, discounting near-term earnings for long-term good points and this has prompted traders to pay an enormous premium for progress names resembling Snowflake. Nonetheless, Snowflake’s vital progress runway, coupled with its modern product ought to make the inventory a good long-term wager at present ranges though we don’t suppose the inventory will see outsize good points within the near-term. There’s additionally little room for error. If Snowflake’s progress falters for any cause, the inventory might see a big correction.
[Updated 1/5/2021] What’s Taking place With Snowflake Inventory?
Cloud-based information warehousing firm Snowflake (NYSE: SNOW) noticed its inventory decline by nearly 30% over the past month. Whereas not a lot actually modified on the bottom for Snowflake, which is on monitor to greater than double revenues this fiscal 12 months, there are a few components which have seemingly pushed the sell-off. Firstly, Snowflake inventory stays very richly valued buying and selling at over 130x consensus FY’21 Revenues and is up by about 130% from its IPO value. Contemplating these massive good points, traders are seemingly reserving some earnings. Secondly, in mid-December Snowflake noticed its first lockup launch publish its IPO, permitting staff to promote 25% of their vested choices. Whereas this solely had a restricted influence, traders are seemingly involved that the complete lock-up expiration, which occurs this March, will put much more strain on the inventory. Snowflake’s float, or the shares out there to traders for buying and selling, stands at nearly 18% of its complete shares excellent at the moment. Thirdly, with Covid-19 vaccines being rolled out globally, traders might be rethinking their allocation to cloud computing shares which have been a sizzling theme by the pandemic, whereas shifting to extra worth bets. This may be an element hurting Snowflake inventory.
[11/30/2020] Why Snowflake Rallied 20%
Cloud-based information warehousing startup Snowflake (NYSE: SNOW) noticed its inventory rally by over 20% final week to about $330 per share, valuing the corporate at about $90 billion. Whereas there wasn’t a lot information from the corporate over the previous week, there might be a few components that drove up the inventory. Firstly, Snowflake is prone to report its first set of quarterly outcomes as a public firm on December 2 and traders are seemingly anticipating robust numbers. For perspective, the consensus estimates that the corporate will publish income of about $148 million, and a loss per share of about -$0.26. Individually, traders have continued to double down on high-growth and software program shares by the final week, after taking a breather earlier within the month amid the vaccine information. For instance, Zoom gained about 12% over the past week whereas Tesla inventory was up by about 18%. This additionally seemingly helped Snowflake. Now whereas Snowflake’s story and progress charges are compelling, the corporate’s lofty valuation stays a priority, contemplating that it now trades at about 150x projected 2021 Revenues. (See our word under for the important thing dangers that Snowflake faces.)
Our interactive evaluation on Snowflake’s Valuation offers extra particulars on the corporate’s Income and valuation.
[Updated 11/12/2020] Snowflake Inventory: Three Key Dangers
Snowflake (NYSE: SNOW), the cloud-based information warehousing firm that went public in September, is valued at over $65 billion, or about $240 per share. Under, we check out among the key dangers that the corporate faces.
Snowflake’s software program allows organizations to handle and analyze massive portions and numerous forms of information throughout public clouds resembling Amazon’s AWS, Google Cloud, and Microsoft’s Azure, in a single, simple to make use of platform. Nonetheless, these public cloud gamers additionally provide their very own information warehousing options. As an illustration, Amazon’s AWS affords Redshift, whereas Google affords BigQuery and these corporations have a powerful incentive to advertise their very own warehousing choices, which allows them to lock prospects into their services. Snowflake acknowledges this danger in its S-1 submitting, noting that these corporations might use management of their public clouds to embed improvements or privileged capabilities for his or her competing choices or bundle their competing merchandise. Snowflake additionally depends on infrastructure from the most important cloud gamers resembling AWS and it’s additionally potential that they might present Snowflake with unfavorable pricing. Such strikes might damage Snowflake’s enterprise and profitability.
Snowflake inventory additionally has appreciable valuation danger, contemplating that it trades at about 115x projected FY’21 revenues, in comparison with the broader software program area that trades at about 8x Revenues. [1] At these valuations, the corporate has little or no room for error and must execute to perfection to justify its inventory value. Furthermore, Snowflake’s public float – which is the variety of shares held by public traders – is sort of low, with the corporate providing simply 28 million shares or about 10% of its complete shares excellent throughout its IPO. The low provide of shares is little doubt a significant cause the inventory has rallied a lot since its itemizing. With Snowflake top off about 2x from its IPO value, it is rather seemingly that staff and traders might money out when the publish IPO lockup interval expires in March 2021, placing downward strain on the inventory.
[Updated 10/21/2020] Snowflake Vs. Palantir
The final month noticed Palantir (NYSE: PLTR) and Snowflake (NYSE: SNOW) – two comparatively excessive profile software program gamers go public. Snowflake’s software program allows organizations to handle and analyze massive portions and numerous forms of information throughout public clouds resembling Amazon’s AWS in a single, simple to make use of platform. Palantir affords massive information and analytics options primarily utilized by governments and intelligence companies, though it has been increasing its presence within the industrial area.
Whereas the 2 corporations are targeted on massive information, traders are valuing them very in a different way. Snowflake inventory trades at over 120x projected FY’21 Revenues (FY ends January) whereas Palantir trades at nearly 15x projected FY’20 Revenues (FY finish December). Does this make sense? How do the businesses examine when it comes to enterprise fashions, income progress charges, and margins? We offer extra particulars under.
See our interactive evaluation on Snowflake’s Valuation and Palantir’s Valuation for extra particulars on the 2 corporations’ valuation.
Revenues & Progress Charges
Palantir’s Revenues grew by 24% to about $740 million in 2019 and progress is prone to pick-up to ranges of over 40% in 2020 as Covid-19 associated disruptions elevated demand for the corporate’s providers. As compared, Snowflake noticed Income develop 173% from $97 million in FY’19 to about $265 million in FY’20, though the expansion fee is prone to decelerate to roughly 110% over the present fiscal primarily based on consensus figures. General, Snowflake’s Revenues ought to develop at the next fee in comparison with Palantir, contemplating its SaaS-based mannequin which might scale to a big base of consumers with a lot much less customization. Palantir, alternatively, wants engineers to adapt its instruments to the distinctive wants of consumers. Snowflake had over 3,100 prospects as of July 2020, in comparison with Palantir which had about 125 prospects as of its final fiscal 12 months.
Profitability
Whereas Palantir is barely forward when it comes to revenue margins contemplating that it’s the extra mature firm (Palantir was based in 2003 versus Snowflake which was based in 2012), we anticipate Snowflake to be extra worthwhile within the long-run given its comparatively extra standardized product and decrease buyer acquisition prices. Snowflake posted a Gross Revenue Margin of 62% for the primary six months of FY’21, with Working Margins standing at -72%. Palantir’s Gross Margins stood at about 72% over the primary six months of 2020, with Working Margins coming in at about -35%.
Valuation
Snowflake inventory has greater than doubled from its IPO value of $120 to about $250 at the moment, valuing the corporate at about $70 billion. Palantir, alternatively, hasn’t moved an excessive amount of since its itemizing and is valued at about $15 billion. There are a few causes for Snowflake’s premium valuation. Firstly, the corporate is rising a lot sooner than Palantir and must also be extra worthwhile within the long-run given its extremely scalable supply mannequin. Buyers have additionally been paying an enormous premium for progress shares. Secondly, in contrast to Palantir which has excessive publicity to authorities contracts – notably in areas associated to surveillance and nationwide safety – inflicting transparency and notion points, Snowflake’s enterprise is targeted on extra industrial prospects.
That stated, Snowflake has appreciable valuation danger, contemplating that it trades at about 122x projected FY’21 revenues, in comparison with Palantir which trades at nearly 15x projected 2020 Revenues. The story might change rapidly. If Snowflake’s progress charges decelerate, with the corporate dealing with competitors from cloud majors resembling Amazon and Google who provide their very own information warehousing options, traders might re-think its valuation. On the opposite aspect, traders might double down on Palantir inventory in the event that they see extra proof factors indicating that the corporate is making progress within the industrial sector, through excessive profile offers or stronger Income progress.
[Updated 9/29/2020] Placing Snowflake’s Valuation Into Perspective
Snowflake (NYSE: SNOW), the cloud-based information warehousing firm that went public just lately, is valued at about $60 billion, or about $220 per share. The corporate trades at a whopping 230x trailing Revenues – nicely above many different high-growth SaaS names. Can Snowflake justify this valuation? In our interactive dashboard evaluation on Snowflake’s Valuation: Costly Or Low cost we break down the corporate’s revenues and valuation and examine it with different high-growth software program gamers. Components of the evaluation are summarized under.
A Transient Look At Snowflake’s Enterprise & Dangers
Snowflake’s software program allows organizations to handle and analyze massive portions and numerous forms of information throughout public clouds resembling Amazon’s AWS, Google Cloud, and Microsoft’s Azure in a single, simple to make use of platform. Snowflake stands to learn as companies more and more transfer to the cloud whereas leveraging massive information and synthetic intelligence. Though main public cloud gamers have their very own information warehousing options, (Amazon’s AWS affords Redshift, whereas Google affords BigQuery), Snowflake’s platform affords extra flexibility in comparison with rivals and works nicely throughout platforms. Nonetheless, the massive cloud gamers have a powerful incentive to advertise their very own warehousing choices, because it allows them to lock prospects into their platforms and providers. There’s a risk that these corporations might use their huge sources and management over their respective platforms to realize an edge over Snowflake.
Snowflake’s Income
Let’s take a more in-depth have a look at what’s driving Snowflake’s Income. Snowflake has two working segments. 1) Merchandise, which embrace Snowflake’s core information warehousing options. Clients pay based on the compute and storage that they use. 2) Skilled Companies – which incorporates consulting, on-site technical answer providers, and coaching associated to the platform.
Snowflake’s Product Income grew from $96 million in FY’19 to about $252 million in FY’20, as the corporate grew its buyer base by 152% from 948 in FY’19 to 2,392 customers. Primarily based on the historic progress fee, and progress over Q2 (it had 3,117 prospects as of July 2020), we anticipate Snowflake’s buyer base to develop to about 4,600 in FY’21, with complete Product revenues coming in at about $530 million. Snowflake’s Whole Income, which incorporates its income from Skilled Companies grew from $97 million in FY’19 to about $265 in FY’20 and we anticipate it to develop 110% to about $557 million in FY’21.
Now Snowflake is just not solely including new prospects at a fast clip, however it’s also higher monetizing its current customers. Snowflake’s Web Income Retention fee – which is the p.c of income retained from the prior 12 months after factoring for upgrades, downgrades, and churn – stood at 158%, indicating that current prospects proceed to spend extra.
Why Is Snowflake’s Buying and selling At Such A Premium?
With benchmark rates of interest at near-zero ranges, traders have typically been paying a premium for progress. Nonetheless, Snowflake inventory, which trades at about 110x our projected FY’21 revenues for the corporate and over 230x FY’20 revenues seems expensive. Let’s examine Snowflake with different excessive progress SaaS and database gamers. Datadog trades at 76x trailing revenues and posted 83% income progress in 2020. Okta trades at 25x trailing revenues and posted 46% progress over its most up-to-date fiscal 12 months. MongoDB trades at 22x and posted 58% progress.
Positive Snowflake is rising sooner than these corporations, however there’s one more reason why the inventory might be buying and selling so excessive, specifically a low provide of shares. Snowflake’s public float – which is the variety of shares held by public traders – stood at simply 28 million shares or about 10% of its complete shares excellent, and the low provide of shares is prone to have prompted a bid up within the value. With Snowflake top off nearly 2x from its IPO value, it is rather seemingly that staff and traders will select to money out because the publish IPO lockup durations expire, placing downward strain on the inventory.
Whereas Snowflake appears to be like overpriced in comparison with Teradata, 2020 has created many different pricing discontinuities that may provide enticing buying and selling alternatives. For instance, you’ll be stunned how the inventory valuation for Microsoft vs. Corcept Therapeutics exhibits a disconnect with their relative operational progress. You could find many such discontinuous pairs right here.
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