SNOW - Snowflake Inc.
367.24 +25.58 (+7.49%)
11:17 AM 12/07/21
NYSE | IEX real time price
I wrote the following article on Snowflake’s results that was just published this morning. I had bought some more Snowflake the day of the results after reviewing the earnings results. I have several reasons for doing so.
A number of the things that I speak of in the article is that Snowflake still has triple digit revenue growth that hasn’t tiled off like many other stocks that were accelerated forward in 2020 by the pandemic like Zoom.
Another fact that I like is that Snowflake has a Net retention rate of something like 173%. I consider a company elite if they can maintain a Net Retention Rate about 130 for multiple quarters. Snowflake has a net retention rate of above 160 for at least 5 quarters. Usually when a stock is above 130, the stock will likely keep going up in the near and medium term.
Snowflake is still gaining momentum among large customers and I like the fact that the company is showing operating leverage and becoming more profitable.
I first wrote about Snowflake in June I believe when it was at a “lower” valuation after a pullback and had a sales multiple of 86.57. People were calling it still “Overvalued”. Well, since then the stock is up well over 50% and the valuation was like a PS of 110 when I wrote the article.
Here is my article titled Snowflake: Positive Q3 Results Adds To The Stock’s Momentum:
When I first wrote about Snowflake in June, it had a sales multiple of 86.57, but after recent earnings, the sales multiple soared to 110.
Some people might call Snowflake “Highly Valued” or even “Grossly Overvalued” but often high valuation is a sign of a high-quality growth stock.
Digital transformation is a secular trend driving an explosion of data, which in turn is driving Snowflake’s results.
In Q3, Snowflake grew product revenue 110% year-over-year, with 173% net revenue retention, RPO growth of 94%, and for the first time achieved non-GAAP operating profitability.
Snowflake is a buy for aggressive investors that believe a high valuation is a sign the market has identified a high-quality growth company that is likely to keep winning.