❄️Snowflake: Lost luster or opportunity? 🌩️
Shares of Snowflake $SNOW once shone on Wall Street, but 2024 has brought bitter disappointment for investors. After several weak earnings and slowing growth, the stock is at all-time lows. Over the course of this year, their value has fallen by more than 37 %, while the Nasdaq technology index has risen by around 25 %.
Snowflake Inc. is known for its cloud-based data solution that allows companies to efficiently collect, store and analyze massive amounts of data. This platform enables customers to obtain key business information that is essential for making the right decisions. In today's competitive environment where data is driving innovation, Snowflakeis uniquely positioned. In addition, interest in artificial intelligence (AI) has increased in recent years, presenting further growth potential. AI models are "data hungry", and Snowflake can be a key player in supplying the necessary datasets to train these models. 📊🤖
Despite hopes that Snowflake would take advantage of the AI race , the results have not been what investors expected. Revenue growth has slowed and it's questionable whether the company is losing its breath. However, in the second quarter of fiscal 2025, the company had 10,249 customers, a year-over-year increase of 21 % from the previous year, when it had 8,456 customers. While this growth shows a healthy customer base, it's not enough for investors.
The company's net revenue retention rate is 127 %, so it's clear that existing customers are spending more. This means that Snowflake is able to earn higher revenues from those who already use its services - a key indicator for long-term growth. 🔑
Profitability remains the biggest concern. Since going public in 2020 is Snowflake a loss-making company, and while revenue growth is still underway, it's clear that the company still has a long way to go to turn a profit. Growth has slowed and investors are starting to lose patience. Companies often focus on improving efficiency and profitability when growth slows, but this is not yet the case Snowflake. 🚨
Price to earnings ratio (P/S), which is roughly 12xshows that even though the company Snowflake is not profitable, the stock is not overpriced compared to other software companies. But the biggest question is: When will Snowflake start showing improvement in margins and profits? This step is crucial for the company to maintain the necessary investor confidence.
Snowflake has an exceptional product that is extremely useful and is constantly finding new uses. The importance of data in business continues to grow and the company is in a position to take advantage of this. Yet it is crucial that management find a way to increase margins and move closer to profitability.
What is your opinion of Snowflake?
Nothing too interesting for me, so I'm not adding it to the watchlist.
It's pretty classic that after an IPO, the stocks of not-so-successful and good companies will rise for a while, but then the downturn just comes and the stock falls a lot.
I used to be quite intrigued by this stock, but I'm definitely not buying it now.
Buffett's investment here didn't pay off. I didn't go into it being I've had the stock on my watchlist since the IPO. I certainly don't plan on buying the stock now either.
The results and overall all the numbers for this company are bad and the chart looks scary too. This is pure speculation. I'd rather invest in bigger and more stable companies.