Snowflake
Snowflake is probably one of the premier growth stocks in the market as evidenced by its 83% revenue growth rate in the quarter. Additionally, unlike so many tech and cloud companies, there is little evidence of a slowdown which is evidence that its product continues to deliver value to customers. However, it still has a very rich valuation as shown by its forward P/E of 465 and P/S of 35.
Overall, Snowflake's stock is down 45% YTD and off by 60% from it's all-time high in November of last year. Yet, shares are up 90% since they bottomed in mid-June along with the rest of the market.
Inside the Numbers
In Q2, Snowflake reported a loss of $0.70 per share which was above expectations of a loss of $0.64 per share. Revenue came in higher than expectations at $497 million, vs. $467 million. This was an 83% increase from last year's Q2 but a very mild deceleration from 85% growth in the previous quarter. Unlike many companies, Snowflake had an impressive 21% growth on a quarterly basis as well. Overall, it had a net loss of $166 million which was slightly better than last year's $201 million loss in Q2.
Most of Snowflake's revenue is considered product revenue which is derived from the use of its platform. In the next quarter, it sees revenue between $500 million and $505 million and it sees full-year revenue between $1.91 billion and $1.92 billion. It also sees strong margins of 75% for gross margins and 17% profit margins as well.
In the conference call, management acknowledged that there had been some slowdown among customers in the tech industry with less use than expected. The most notable weakness was in consumer-facing cloud companies, however, strength in other areas like finance and healthcare was enough to offset this weaknesses.
It also sees future growth coming from different industries and plans to continue building more niche products for different industries. This is aligned with the restructuring of its sales team to a vertical model from a geographic one.
