Analysts are upbeat on Snowflake’s fundamentals, however, the company will need a strong earnings report to justify its high market cap.
If 2020 was the year for publicly traded cloud companies to prosper — driven by the pandemic and its resulting work-from-home reality — then 2021 is the year for testing the strength of these tech stocks. One victim of this volatility has been Snowflake (NYSE: SNOW), which has been caught up in the recent sell-off. However, if the cloud company reports a strong earnings report on Wednesday, it should help shares bounce back.
As Snowflake’s stock has fallen almost 18% over the last six months, and the company remains on course for profitability, its shares now have a much more attractive valuation.
What is Snowflake Inc?
Snowflake is a data lake, which stores unstructured and semistructured data that is then used in analytics to create insights stored in its data warehouse. The California-based company’s services allow businesses to easily buy and ingest data instantaneously compared with the traditional process that can take months.
Snowflake has more than 3,000 customers, and impressively, nearly 30% of the Fortune 500 are customers.
When will Snowflake report its first-quarter earnings?
Snowflake will report its first-quarter earnings for 2021 on Wednesday, 26 May, after market close.
How can I listen to Snowflake’s earnings?
To access the report and financial statements for the quarter, all you need to do is visit Snowflake’s Investor Relations page.
What to expect from Snowflake’s first-quarter earnings:
Revenue and Earnings: Snowflake expects revenue between $195 million and $200 million, up from $178.3 million in Q4, while analysts expect the firm to report a loss of $0.16 per share. The cloud-computing company’s results are expected to have been boosted from the strong adoption of its Data Cloud platform and increased exposure to the data warehousing market.
In the fourth quarter, Snowflake’s product revenue increased 116% year-over-year (YoY). In the soon-to-be reported quarter, Snowflake expects its product sales to nearly double.
Customers: For the fourth quarter, Snowflake had 4,139 customers, up from the 3,554 customers in Q3. That’s a customer growth rate of 16% between quarters. Investors will therefore be looking for Snowflake to at least match or beat that growth for Q1.
In addition, customers with more than $1 million in trailing 12 months’ product revenues increased to 77 in Q4 from 65 in the previous quarter. Shareholders will also likely be asking questions if this momentum is not met.
Q2 Guidance: Many expect Snowflake’s Q2 guidance to come in below analysts’ estimate, just like fellow cloud firm Fastly. Like Fastly, Snowflake could also be negatively affected by the upcoming reopening of the global economy as the work-from-home trend continues to weaken. This is primarily due to companies not needing to keep and analyze data in the cloud at the same level as they did during the pandemic as many businesses are set to return to the office.
Many experts on Wall Street consider Snowflake’s valuation to be too high, stating that while its fundamentals and growth outlook remain strong, its current valuation accounts for the optimistic scenario that the company found itself in during the pandemic. Shareholders will therefore be keen to hear Snowflake’s thoughts about how it will continue to expand its customer base after the pandemic.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.