Snowflake (SNOW) bets on decoupled cloud architecture, stock rallies

February 07, 2022 12:29 PM PST | By Rupam Roy

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Snowflake (SNOW) bets on decoupled cloud architecture, stock rallies — Image source: whiteMocca,shutterstock

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Highlights

The SNOW stock rallied on Monday after analysts gave a bullish outlook.

Snowflake expects product sales to surge to around US$10 billion by 2029.

The company will report its fourth-quarter and fiscal 2022 results on March 2.

The Snowflake Inc. (NYSE:SNOW) stock jumped nearly 9% on Monday after analysts provided a bullish outlook for the share. Its shares have been declining this year.

The Snowflake stock plummeted more than 16% in 2022, as of February 4. It also fell around 31% from its all-time high of US$405.00 on November 17, 2021.

On Monday, it was trading at US$299.95 at 1:32 pm ET, up 8.79% from its previous close.

This year's decline may have been driven by the broader tech sell-off witnessed lately on concerns over the anticipated tighter monetary policy to curb inflation. This year, the Federal Reserve has indicated multiple interest rate hikes as inflation rose to nearly four decades high.

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The Bozeman, Montana-based Snowflake, a cloud-computing warehousing firm, had launched its IPO in September 2020. The company earns revenue mainly from IT and cloud products.

Monday’s gains come after its bigger peers in the industry like Microsoft, Google, and Amazon posted robust earnings in the fourth quarter led by ad and cloud revenue.

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Microsoft's revenue from cloud offering Azure rose 46% YoY, Google's cloud revenue surged 45% YoY, and Amazon's cloud business generated US$17.78 billion in revenue, representing an increase of 39.5% YoY.

These blockbuster earnings may have bolstered investors’ confidence in the cloud business. Besides, Snowflake's upbeat sales guidance was hard to miss. The company said that its product sales may climb to roughly US$10 billion by 2029, representing an annual growth of over 37%.

The solid long-term growth outlook, along with the stock’s relatively lower price, makes it attractive. Also, Snowflake products have a distinct advantage over its rivals.For instance, its decoupled architecture helps separate the storage services from computing. This help clients to pick a cloud service provider of their choice.

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Snowflake fourth-quarter results on March 2

It will report its fourth-quarter and fiscal 2022 results on March 2, after the market closes.

In Q3, FY22, its product revenue rose 110% YoY to US$312.5 million. It reported a net loss of US$154.85 million, or US$0.51 per share, against a loss of US$168.88 million, or US$1.01 per share a year ago.

Bottomline

The tech stocks have retreated this year amid various macro-economic concerns. The S&P 500 technology sector declined more than 8% in 2022 after an extraordinary run last year.

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