Snowflake (SNOW) Pre-Earnings Analysis


Snowflake is set to report its quarterly earnings later this month on February 28th. Analysts are optimistic about revenue growth, but are still expecting a negative number when it comes to their earnings per share. Despite the company’s ability to grow revenue from under 100M in 2018 to over 2B last year, they haven’t been able to move closer to profitability, which is concerning for a service based tech company. With a 70B dollar valuation, Snowflake will have to show to exponential growth to be fairly valued. Growth must come first and foremost from revenue, but more importantly, they need to establish a path to profitability for their investors. Their revenue needs to grow close to 7B on an annual basis for them to have a fairer valuation. Their balance sheet is healthy, reading about a 4:1 asset to liabilities ratio, but their free cash flow is light with about 700M at hand. 

The company has made a lot of its money from partnerships with other giants. One of its most prevalent partnerships is with Amazon, which just reported strong quarterly earnings. This could foreshadow what’s come from SNOW on earnings. Plus their involvement with artificial intelligence could provide a sympathy boost for them amongst investors. 

Technical analysis:

SNOW’s chart has slowly been clawing back in recent months, but it is nowhere near its all time highs of 405.00. Their current revenue and overall fundamentals aren’t enough to move it back to those levels, but that could change quickly for a young company in the right field and with the right product. Their move in recent months can be more attributed to the overall market rally than interest in the stock itself.

From now till earnings, if markets continue to push, SNOW will likely gain, especially after Amazon’s earnings. We expect a move to 222.00 as long as it holds the 211.75 breakout.