Snowflake’s Growth May Be Slowing, Analyst Says

August 16, 2022

Categories: ProfitabilityTags: $NYSE:SNOW, market news, NYSE, stock analysisViews: 68

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Snowflake($NYSE:SNOW), a data warehousing company, is scheduled to report its second-quarter results on August 24. Monness, Crespi, Hardt, an investment firm, has said that although Snowflake is “well positioned” for long-term trends, it could report decelerating top-line growth. Analyst Brian White, who has a neutral rating on Snowflake, noted that the company is expected to generate $479.5 million in revenue during the quarter, up 76% year-over-year and 14% sequentially. However, this is below the three-year average of 26%. White also observed that the expected operating margin of 1% is “well below” the 20.8% that Datadog reported in its most recent quarter, and even the 22.8% for Palantir. In a note to clients, White wrote that “although Snowflake enjoys rapid growth, execution has proven less consistent relative to our software coverage at large and the spending environment has now turned less generous.” He added that the broader software space has started to see a bit of a downturn with the release of June quarter results. It is yet to be seen how these factors will affect Snowflake’s market and earnings in the long term.

Market Reaction

Snowflake’s stock may be slowing down, but the company is still growing. On Monday, Snowflake’s stock opened at $167.8 and closed at $170.4, up by 1.0% from the prior closing price of 168.7. Despite this, the media sentiment surrounding Snowflake is mostly positive.

VI Analysis

Companies with strong fundamentals are more likely to have long-term potential. The below analysis on SNOWFLAKE’s fundamentals is made simple by VI app. According to VI’s Star Chart, SNOWFLAKE is classified as a ‘cheetah’ a type of company that has achieved high revenue or earnings growth, but is considered less stable due to lower profitability. High growth companies are deemed more volatile as they attempt to grow faster. SNOWFLAKE is strong in asset, growth, and weak in dividend, profitability. SNOWFLAKE has a high health score of 7/10 considering its cashflows and debt, meaning it is capable of paying off debt and funding future operations.