Snowflake stock analysis. SNOW stock.
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At 22 times revenue, Snowflake is one of the most expensive stocks on the public markets. The reason for that is rapid growth. It was the fastest company in history to hit 1 billion in revenue. And last years revenue growth was close to 70%.
To understand Snowflake, imagine you are a multinational corporation that has thousands, even millions of different datasets covering all different aspects of your business.
Snowflake provides the software to organize all that data and then analyze it in the cloud. And it does this with artificial intelligence and machine learning. Snowflake also has a unique pricing method whereby companies only pay for the amount of storage and computing power that they use. This means there are no upfront costs or long-term commitments.
Based on the latest share price, Snowflake is valued at 55.1 billion dollars. With 5.1 billion of cash and investments, and zero debt, the enterprise value is 50 billion.
Revenue over the last 12 months climbed to 2.3 billion and free cash flow was 636 million. But because the company is still investing for the future and because of stock-based compensation of almost a billion dollars, net income was negative 858 million.
But it’s also worth mentioning that Snowflake has remaining performance obligations of 3.4 billion, the majority of this should be recognized as revenue within the next two years. That means the price to sales multiple is maybe not as high as the numbers suggest.
And aside from rapid revenue growth, Snowflake boasts a number of impressive metrics.
Net revenue retention in Q1 was 151%, gross margins were 77% and adjusted free cash flow hit 46% of revenue.
And Snowflake is also a benefficiary of the AI boom. Large language models are built on vast amounts of data and Snowflake can help organizations run such models on their own data and help to structure not text-forms of data.
Moreover Snowflake is integrated with all 3 of the fast growing cloud platforms, AWS, Google Cloud and Azure.
On the Q1 earnings call CEO Frank Slootman said that Data science, machine learning and AI use cases on Snowflake are growing every day. In Q1, more than 1,500 customers leveraged Snowflake for one of these workloads, up 91% year-over-year.
Interestingly, Snowflake dropped 11% after earnings due to a cut in guidance but it took investors less than 5 trading sessions to recoup those losses.
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