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Snowflake Stock Up 8% in a Week: What's Next for Investors?
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Snowflake (SNOW - Free Report) shares have increased more than 8% in the past week, outperforming the Zacks Internet Software industry’s gain of 2.2% and the broader Zacks Computer & Technology sector's return of 1.7%.
However, we believe the recent momentum will be short-lived given the stiff competition from the likes of Databricks, increasing pricing pressure and growing GPU-related costs. Challenging macroeconomic conditions have been a headwind for SNOW’s near-term prospects.
This cloud computing company is having a terrible 2024, with shares having declined 32.1% year to date. Since the release of its first-quarter fiscal 2025 results (May 22), SNOW shares have declined 17.3% reflecting sluggish guidance.
Moreover, the shares are trading below the 50-day moving average, indicating a bearish trend.
SNOW Stock Trades Below 50-Day Average
Image Source: Zacks Investment Research
SNOW expects fiscal 2025 product revenues of roughly $3.3 billion, indicating 24% year-over-year growth, much slower than the 38% year-over-year growth it reported in fiscal 2024.
Snowflake lowered its fiscal 2025 margin guidance due to increased GPU-related costs as it aggressively invests in AI initiatives. For fiscal 2025, SNOW expects a non-GAAP product gross margin of 75% (down from previous guidance of 76%) and a non-GAAP operating margin of 3% (down from previous guidance of 6%).
The Zacks Consensus Estimate for fiscal 2025 is currently pegged at 63 cents per share, down by a penny over the past 30 days and indicating a 35.71% year-over-year decline.
SNOW YTD Performance
Image Source: Zacks Investment Research
Expanding Portfolio Aids Long-term Prospects
SNOW’s expanding portfolio aids long-term prospects. In fiscal 2024, it introduced capabilities including Marketplace Listing Auto-Fulfillment & Monetization, account replication & failover, Query Acceleration Service, geospatial analytics and Snowpipe Streaming.
Iceberg tables, Hybrid tables, and Cortex Large Language Model (LLM) and machine learning-powered functions became available in public preview. These capabilities are expected to become generally available in fiscal 2025.
SNOW's Robust Product Portfolio
Image Source: Snowflake
In the fiscal first quarter, Snowflake announced Arctic, its own LLM.
Snowflake recently launched Polaris Catalog — a vendor-neutral, open catalog implementation for Apache Iceberg — the open standard of choice for implementing data lakehouses, data lakes and other modern architectures.
Polaris Catalog is supported by Iceberg’s open-source REST protocol, which provides an open standard for users to access and retrieve data from any engine that supports the Iceberg Rest API, including Apache Flink, Apache Spark, Dremio, Python, Trino and more.
Polaris Catalog offers enterprises and the entire Iceberg community with new levels of choice, flexibility, and control over their data, with full enterprise security. It offers Apache Iceberg interoperability with Amazon’s (AMZN - Free Report) cloud division Amazon Web Services (AWS), Confluent, Dremio, Google Cloud, Microsoft (MSFT - Free Report) Azure, Salesforce and more.
Strong Partner Base: A Key Catalyst
SNOW is benefiting from an expanding partner base that includes Amazon, Microsoft, NVIDIA (NVDA - Free Report) , Fiserv, EY, Deloitte, LTIMindtree, Next Pathway and S&P Global, among others.
Its collaboration with NVIDIA will help customers and partners build customized AI data applications in its platform powered by NVIDIA AI.
Snowflake has adopted NVIDIA AI Enterprise software to integrate NeMo Retriever microservices into Snowflake Cortex AI, its fully managed LLM and vector search service. The integration will help enterprises to smoothly connect custom models to diverse business data and deliver highly accurate responses.
Snowflake and Microsoft recently announced an expanded partnership that plans to offer an interoperability experience between Snowflake and Microsoft Fabric OneLake. The interoperability is possible due to their support for the industry’s leading open standards for analytical storage formats, Apache Iceberg and Apache Parquet.
Snowflake also announced Snowflake Data Clean Rooms to customers in AWS East, AWS West and Azure West. SNOW leveraged its acquisition of data clean room technology provider Samooha to launch the solution.
SNOW Stock Not Cheap
Snowflake’s near-term prospects remain foggy due to rising costs for GPU and stiff competition from the likes of Databricks, as well as traditional database providers like Teradata.
Snowflake stock is trading at a significant premium compared to the Zacks Internet Software industry. Its forward 12-month P/S of 11.89X is higher than the industry’s 2.66X.
We believe investors should wait for a better entry point for Snowflake, which currently carries a Zacks Rank #3 (Hold), given the modest growth prospect and a stretched valuation in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Snowflake Stock Up 8% in a Week: What's Next for Investors?
Snowflake (SNOW - Free Report) shares have increased more than 8% in the past week, outperforming the Zacks Internet Software industry’s gain of 2.2% and the broader Zacks Computer & Technology sector's return of 1.7%.
However, we believe the recent momentum will be short-lived given the stiff competition from the likes of Databricks, increasing pricing pressure and growing GPU-related costs. Challenging macroeconomic conditions have been a headwind for SNOW’s near-term prospects.
This cloud computing company is having a terrible 2024, with shares having declined 32.1% year to date. Since the release of its first-quarter fiscal 2025 results (May 22), SNOW shares have declined 17.3% reflecting sluggish guidance.
Moreover, the shares are trading below the 50-day moving average, indicating a bearish trend.
SNOW Stock Trades Below 50-Day Average
Image Source: Zacks Investment Research
SNOW expects fiscal 2025 product revenues of roughly $3.3 billion, indicating 24% year-over-year growth, much slower than the 38% year-over-year growth it reported in fiscal 2024.
Snowflake lowered its fiscal 2025 margin guidance due to increased GPU-related costs as it aggressively invests in AI initiatives. For fiscal 2025, SNOW expects a non-GAAP product gross margin of 75% (down from previous guidance of 76%) and a non-GAAP operating margin of 3% (down from previous guidance of 6%).
The Zacks Consensus Estimate for fiscal 2025 is currently pegged at 63 cents per share, down by a penny over the past 30 days and indicating a 35.71% year-over-year decline.
SNOW YTD Performance
Expanding Portfolio Aids Long-term Prospects
SNOW’s expanding portfolio aids long-term prospects. In fiscal 2024, it introduced capabilities including Marketplace Listing Auto-Fulfillment & Monetization, account replication & failover, Query Acceleration Service, geospatial analytics and Snowpipe Streaming.
Iceberg tables, Hybrid tables, and Cortex Large Language Model (LLM) and machine learning-powered functions became available in public preview. These capabilities are expected to become generally available in fiscal 2025.
SNOW's Robust Product Portfolio
In the fiscal first quarter, Snowflake announced Arctic, its own LLM.
Snowflake recently launched Polaris Catalog — a vendor-neutral, open catalog implementation for Apache Iceberg — the open standard of choice for implementing data lakehouses, data lakes and other modern architectures.
Polaris Catalog is supported by Iceberg’s open-source REST protocol, which provides an open standard for users to access and retrieve data from any engine that supports the Iceberg Rest API, including Apache Flink, Apache Spark, Dremio, Python, Trino and more.
Polaris Catalog offers enterprises and the entire Iceberg community with new levels of choice, flexibility, and control over their data, with full enterprise security. It offers Apache Iceberg interoperability with Amazon’s (AMZN - Free Report) cloud division Amazon Web Services (AWS), Confluent, Dremio, Google Cloud, Microsoft (MSFT - Free Report) Azure, Salesforce and more.
Strong Partner Base: A Key Catalyst
SNOW is benefiting from an expanding partner base that includes Amazon, Microsoft, NVIDIA (NVDA - Free Report) , Fiserv, EY, Deloitte, LTIMindtree, Next Pathway and S&P Global, among others.
Its collaboration with NVIDIA will help customers and partners build customized AI data applications in its platform powered by NVIDIA AI.
Snowflake has adopted NVIDIA AI Enterprise software to integrate NeMo Retriever microservices into Snowflake Cortex AI, its fully managed LLM and vector search service. The integration will help enterprises to smoothly connect custom models to diverse business data and deliver highly accurate responses.
Snowflake and Microsoft recently announced an expanded partnership that plans to offer an interoperability experience between Snowflake and Microsoft Fabric OneLake. The interoperability is possible due to their support for the industry’s leading open standards for analytical storage formats, Apache Iceberg and Apache Parquet.
Snowflake also announced Snowflake Data Clean Rooms to customers in AWS East, AWS West and Azure West. SNOW leveraged its acquisition of data clean room technology provider Samooha to launch the solution.
SNOW Stock Not Cheap
Snowflake’s near-term prospects remain foggy due to rising costs for GPU and stiff competition from the likes of Databricks, as well as traditional database providers like Teradata.
Snowflake stock is trading at a significant premium compared to the Zacks Internet Software industry. Its forward 12-month P/S of 11.89X is higher than the industry’s 2.66X.
We believe investors should wait for a better entry point for Snowflake, which currently carries a Zacks Rank #3 (Hold), given the modest growth prospect and a stretched valuation in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.