SPECIAL REPORT The Top 7 Stocks for 2024

5 Investors Betting Big on Snowflake (SNOW) Stock


  • Shares of cloud computing specialist Snowflake (SNOW) popped significantly higher on Thursday.
  • Management disclosed a Q3 earnings print that beat on the top and bottom lines.
  • Institutional and options appreciate the surprise sector sentiment shift.
SNOW stock - 5 Investors Betting Big on Snowflake (SNOW) Stock

Source: rblfmr / Shutterstock.com

Amid a slow session on Wall Street Thursday, cloud computing specialist Snowflake (NYSE:SNOW) brightened the mood with a strong performance for the third quarter. Beating analysts’ projections on both the top and bottom lines, Snowflake justified the support provided by institutional investors. Additionally, SNOW stock may be benefiting from short-covering activity in the options market.

To begin, Snowflake — which offers cloud-based data storage and analytics under a business model often labeled as Data as a Service (DaaS) — disclosed adjusted earnings per share of 25 cents, up 127% year-over-year (YOY). In contrast, analysts covering SNOW stock anticipated EPS to hit 16 cents.

On a GAAP basis, the technology specialist reported a loss of 65 cents compared to a loss of 63 cents a year earlier. However, the Street expected the company to post a loss of 76 cents. However, investors paid more attention to the revenue tally of $734.2 million, representing a 32% YOY lift. Further, this haul beat the consensus target of $713.8 million.

Encouragingly, William Blair analyst Jason Ader noticed that management echoed commentary from its software and cloud peers regarding stabilization trends in customer consumption. As well, the company’s growth in September exceeded expectations.

Specifically, Blair cited expansions within Snowflake’s largest customers as catalysts for the consumption improvement. Said consumption centers on optimization initiatives and renewed interest in migrating away from legacy data warehouses.

Investment and Speculative Interests Boost SNOW Stock

Looking ahead to the fourth quarter, Snowflake anticipates product revenue to land between $716 million to $721 million. On the other hand, analysts had previously anticipated $696 million. Naturally, the improved top-line outlook helped fire up SNOW stock. Significantly, management stated that the company has 436 customers with trailing 12-month (TTM) product revenue greater than $1 million.

Also, on a fundamental level, Reuters mentioned that Snowflake is pushing further into artificial intelligence (AI). Management stated that spending on cloud-related software has been on the rise as enterprises look to adopt AI-linked applications. Given the greater interest in generative AI, Gartner’s projections of 20.4% growth in public cloud services may be reasonable.

To that end, several institutional investors back SNOW stock. The five largest supporters based on an increase in holdings based on the latest Form 13F disclosures are as follows:

  • Fidelity Investments increased its holdings by nearly 1.5 million shares.
  • Winslow Capital Management increased its holdings by 1.48 million shares.
  • Holocene Advisors increased its holdings by 1.26 million shares.
  • Vanguard Group increased its holdings by 743,211 shares.
  • Citadel Advisors increased its holdings by 735,000 shares.

Additionally, bullish options traders find themselves in a favorable position. Specifically, Fintel’s options flow data shows that earlier, institutional investors sold call options that are either in the money (ITM) for call buyers or near ITM.

In other words, bearish positions are getting blown up or are about to. That may fuel speculation for short-covering tactics, which may add further upside pressure to SNOW stock.

Why It Matters

According to TipRanks, analysts rate SNOW stock as a consensus strong buy. This assessment breaks down as 25 buys and five holds. Overall, the average price target lands at $215.63, implying about 16% upside from the time of writing.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media, https://investorplace.com/2023/11/5-investors-betting-big-on-snowflake-snow-stock/.

©2024 InvestorPlace Media, LLC