Snowflake Stock (NYSE:SNOW)
While Snowflakes stock (NYSE:SNOW) price has fallen, its recent results indicate that now may be an excellent moment to invest.
Snowflake’s fiscal Q2 2023 performance was outstanding in every way.
The firm is on its way to profitability, thanks to Big Tech’s massive demand for cloud services.
For technology stocks, 2022 has been a whirlwind. Investors have heard management teams cite supply chain issues, semiconductor shortages, labor difficulties, and inflation throughout the year.
While we are not yet out of the woods, several equities look like decent buys at current prices. Below, we’ll look at why now could be a good time to buy some Snowflake stock (NYSE:SNOW).
Snowflake reported $497 million in sales for the second quarter of fiscal 2023, which ended July 31, 2022, an increase of 83% year over year. Snowflake’s income is generated primarily via two channels: goods and services. Product revenue is the company’s software platform, which often has greater profits. On the other hand, professional services are often low-margin, non-recurring revenue. Snowflake produced $466 million in product revenue for the quarter ending July 31, 2022, an increase of 83% over the same time the previous year.
When we examine Snowflake stock’s (NYSE:SNOW) key performance metrics, the company’s strong double-digit sales growth should come as no surprise. For example, Snowflake’s net retention rate was 171% as of July 31, 2022, up from 169% in the second quarter of fiscal 2022.
Net retention is an essential indicator for software companies since it reflects yearly recurring income streams after excluding client turnover. Because this ratio is more than 100%, Snowflake is vastly outselling any churn experienced by the organization.
Another critical indicator disclosed by Snowflake is residual performance obligations (RPO), which monitors the dollar amount signed but not yet paid by clients. In other words, RPOs owe money to Snowflake at some point in the future. The company’s RPOs were $2.7 billion as of July 31, 2022, showing a 78% year-over-year increase.
While the results call, Snowflake CFO Mike Scarpelli claimed that “the bulk of our clients, 80-plus percent, operate in AWS, with around 18% in Azure and 2% in GCP.” This relationship is not altogether unexpected, given each company’s cloud outcomes.
Since its initial public offering precisely two years ago, Snowflake stock (NYSE:SNOW) has achieved unprecedented highs before plummeting. At the time of writing, Snowflake stock (NYSE:SNOW) was down 44% in 2022.
Some investors may claim that Snowflake stock (NYSE:SNOW) is overpriced. While the firm is seeing excellent top-line growth, it is not yet profitable and trades at 37 times trailing-12-month sales. However, by the end of the second quarter of fiscal 2022, Snowflake was selling at 110 times, trailing-12-month revenue. To put this in context, Snowflake’s value has dropped by about two-thirds in the past year.
Featured Image- Megapixl @ Michaelvi