Snowflake (NYSE: SNOW) Gradual Growth To SuccessFundamentals
Snowflake (SNOW) sells data analytics and management software that runs on cloud computing platforms. The company is evolving into a cloud data management platform.
SNOW stock is up 4% in 2023 after pulling back from bigger gains. The Nasdaq composite has jumped 29% amid buzz over generative artificial intelligence.
The company offers Snowflake Cortex, a new fully-managed service to provide access to large language models, AI models and vector search functionality.
When the company reported April-quarter earnings, Snowflake cut its full-year fiscal 2024 outlook. Snowflake lowered its forecast for product revenue growth to 34% to $2.6 billion from its earlier projection for 44% to 45% growth.
SNOW stock could get a boost from a recent multi-year expansion of its partnership with Amazon Web Services. Both companies will contribute to stepped-up marketing.
Snowflake has committed $2.5 billion in spending on AWS over the next five years as part of the deal. The two companies will expand strategic initiatives by developing industry solutions, deepening product integrations, increasing sales collaboration, and expanding marketing strategies. Snowflake and AWS currently have over 6,000 joint customers. About 84% of Snowflake customers run cloud workloads on AWS.
SNOW Stock: Biggest Software IPO
Because Snowflake's business model is consumption-based rather than subscription-based, bearish investors have raised concerns over a possible U.S. recession curbing demand.
Snowflake aims to enable customers to access and distribute data across their business ecosystem, thereby accelerating business intelligence and advanced analytics.
Snowflake stock pulled off the largest initial public offering ever by a software company in September 2020. The Snowflake IPO raised $3.4 billion.
Snowflake hosted a user conference and analyst day in Las Vegas in June 2022. The company said new products in app development, data security and other areas will expand its total addressable market to $248 billion by 2027, up from $90 billion last year.
Snowflake Stock: Consumption Business Model
Most software stocks typically trade as a multiple of forward-looking revenue growth. Snowflake is not a software-as-a-service, or SaaS, company that aims to build recurring subscription revenue.
At the user event, the company addressed concern over its consumption-based revenue business model. Snowflake revenue is tied to how much data its customers crunch and store. One issue is that usage could slow during a recession.
Another issue is that customers view Snowflake as expensive if they don't control usage. Some analysts say there's less transparency and predictability than with a subscription-based SaaS business model.
Snowflake Stock: Competition Increasing
Further, Snowflake stock hit an all-time high of 429 in early December of 2020. But SNOW stock swooned amid analyst concerns over its lofty valuation.
Competition is increasing. Salesforce (CRM) recently introduced Genie, a real-time data solution, that could clash with Snowflake at some point.
Whether Amazon Web Services or Google cloud ratchet up competition remains a concern for SNOW stock. Hewlett Packard Enterprise (HPE), with its GreenLake platform, is another rival.
Technical Analysis
We can see a Horizontal Trend Line forming a Head and Shoulder In Snow Inc. meaning the Stock is likely to swingle in-between the support and Resistance Zone Respectively.
Price Momentum
SNOW is trading in the middle of its 52-week range and below its 200-day simple moving
average. Investors are still evaluating the share price, but the stock still appears to have some downward momentum.
