FXTM: Snowflake has medium and long-term investment value

The US stock earnings season has entered the harvest period, and HP (MT5: HP) and Broadcom (MT5: BROADCOM) will report their results next week.

The US earnings season is coming to an end, and in this article we look ahead to the second quarter results of cloud computing company Snowflake (SNOW.US). The company released its latest quarterly results after hours on August 24.

Snowflake offers cloud-based data storage and analysis services, commonly referred to as "data storage as a service," where businesses can use cloud-based hardware and software to store and analyze data.

Part.1

The company's earnings per share and revenue are as follows:

Total revenue:497.20 million USD vs Market Expectations 467.40 million USD

Earnings per share (EPS):-0.03 vs market expectations -0.0132 USD

(Source of data:fxtmFXT(Bloomberg)

From the past record, Snowflake's revenue has grown rapidly since it went public in September 2020. In the eight financial reports that have been released, revenue has exceeded expectations on seven occasions. This quarter is the eighth time that revenue has exceeded market expectations. However, from the perspective of net profit, the company has lost money for multiple consecutive quarters, and the loss was smaller than expected on six occasions. This is the second time that earnings per share have missed market expectations.

Part.2

In addition, investors should also pay attention to the following metrics:

The net revenue retention rate (NRR):This indicator measures customer loyalty to a business over a period of time, expressed as a percentage. In other words, the indicator shows the ability of a business to "retain" customers over a certain period of time. If the retention rate is high, it indicates high customer loyalty and strong customer willingness to increase purchases.

Snowflake has had net revenue retention rates of 177%, 174% and 170% for three consecutive quarters.

2. Company costs:As a "growth company", Snowflake is also characterized by high investment and high debt. The company adopts a performance-driven investment strategy to achieve long-term balanced growth of the company.

This is also reflected in the company's operating expenses in the first quarter, with sales and marketing expenses accounting for 44%, R & D expenses accounting for 17%, administrative expenses accounting for 10%, and the remaining 29% as free cash flow from future investment projects.

Finally, from a valuation perspective, Snowflake's share price has fallen sharply since October last year, but the valuation is still not "cheap". The company's operating margin and free cash flow growth help support high future growth, thus guaranteeing the valuation.

Part.3

Stock prices are rebounding

After bottoming out at 113, Snowflake's share price showed a slight recovery trend. This level became the bottom of the rising channel, and the share price has now climbed above the 50-day moving average, laying the foundation for a medium-term rebound.

If the 50-day moving average can be maintained, the market outlook may test the upper track of the channel. The initial resistance level is 160, and the next resistance level after breaking through is 177, and then it reaches the upper track of the channel. On the contrary, if the stock price falls back below the 50-day moving average, it will fall below the current rising channel, and the initial support level is expected to be 130.

(▲ SNOWFLAKE D1 source: FXTM stock account)

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