Snowflake enjoyed a boffo IPO last September. Since then the shares rose — peaking on December 9, 2020 — before plunging. As of March 12 they traded a whopping 42% below that peak and considerably below their first day closing price.
After its fourth quarter earnings report yielded a larger than expected loss, Snowflake announced an investment in ThoughtSpot, a big data analysis and visualization service.
Does this bode well for Snowflake investors? In a word, maybe. Snowflake exceeded revenue expectations in its latest quarter but reported a higher than expected loss. What’s more, investors see Snowflake’s valuation as too high.
If ThoughtSpot can grow faster due to that partnership, Snowflake might generate the extra revenue it needs to exceed investors’ expectations and justify a higher stock price.
Snowflake’s Boffo Fourth Quarter
Snowflake sells software that companies use to run a data warehouse on public cloud platforms such as AWS, Microsoft, and Google. Customers pay based on how much they use the software — rather than paying a flat subscription fee, according to SiliconAngle.
Snowflake reported very strong revenue growth. Barron’s reported that its fourth quarter revenue of $190.5 million was 117% more than the year earlier and 7% above the Wall Street consensus estimate. Its product revenue of $178.3 million rose 116% from the year before — which was and 8% higher than the midpoint of its guidance range.
The problem in Snowflake’s report was that its loss was much larger than Wall Street had anticipated. As SiliconAngle reported, Snowflake’s adjusted net loss per share of 70 cents was a whopping 53 cents a share above the 17 cents that Wall Street had forecast.
Snowflake offered a stronger than expected revenue growth forecast for the current quarter. With Wall Street anticipating $196 million in revenue for the first quarter, Snowflake said its expects product revenue in the range of $195 million and $200 million. For 2021, Snowflake’s expected revenue range of $1 billion to $1.02 billion was inline with the consensus forecast of $1.01 billion.
Snowflake CEO Frank Slootman expressed pride in the company’s “strong performance — including its “triple-digit product revenue growth.” He added that the results “indicate that customers across multiple industries rely on the Snowflake Data Cloud to mobilize their data and enable breakthrough data strategies,” noted Barron’s
ThoughtSpot Takes $20 Million Investment From Snowflake
ThoughtSpot is going after the global Business Intelligence (BI) market. According to MarketsAndMarkets, BI is expected to grow ata 7.6% compound annual rate from $23.1 billion to $33.3 billion by 2025.
Market growth is due to many “factors including digital transformation, rising investments in analytics, more demand for data visualization dashboards, and increased cloud adoption,” notes MarketsAndMarkets.
Snowflake — which has been partnering with ThoughtSpot since 2019 — announced March 9 that it had invested $20 million in the company. According to CRN, the funding will be used to “accelerate development of its search and AI-based analytics software that can access and analyze cloud-based data.”
Christian Kleinerman, Snowflake senior vice president of product, said that the investment “showcases our continued partnership with ThoughtSpot and commitment to helping our customers get better and faster insights while leveraging the power of the Snowflake Data Cloud.”
ThoughtSpot previously raised $543.7 million with its biggest investment — a $248 million Series E funding — taking place in August 2019 valuing the company at $1.95 billion.
ThoughtSpot is in the middle of transitioning to a fully cloud-based business model. It is enjoying considerable growth in this part of its business. For example, annual contract value (ACV) for its cloud deals has grown 213% in the last quarter. In the last year, 54% of its ACV came from cloud products, according to Business Wire.
Why ThoughtSpot Sees Fast Growth In Its Future
ThoughtSpot did not take funds from Snowflake because it needed the money. As CEO Sudheesh Nair told me in a March 9 interview, “We raised $248 million in 2019 and we have that much in the bank today. The $20 million was not raised because we needed money. It is a validation of what customers are seeing. This partnership is [complicated by the fact that our competitor, Tableau] uses Snowflake as does Microsoft — whose business intelligence (BI) service competes with ThoughtSpot.”
Nair envisions the partnership as helping to achieve a shared vision for the future. “There are two things about Snowflake’s CEO — Frank Slootman — and its CFO: they are focused on how will we do it best for the customer and they are always not timid. They have customers like Capital One and Hulu/Disney
DIS
. Putting ThoughtSpot and Snowflake together will work because we share the same value,” he said.
Snowflake sees a large opportunity and concluded that ThoughtSpot was well-positioned to win a large piece of the pie. “Snowflake is a $60 billion to $80 billion company. What is in it for them? They know where ThoughtSpot is going and they realize that we are moving from traditional BI services — they only do a quarter of what ThoughtSpot does. We offer a massively personalized service enabling organizations to act quickly on insights generated by analyzing data,” said Nair.
Why ThoughtSpot will Take Market Share from Incumbents
ThoughtSpot’s product can be much more useful for business decision makers than traditional BI. How so? Both ThoughtSpot and traditional BI products can generate reports. As Nair said, “For example, I am in Los Altos. 10,000 people got vaccinated here. Business intelligence can report on it — producing pie charts.”
ThoughtSpot can do three other valuable things for organizations that BI can’t. Here’s how:
ThoughtSpot can provide insights — by analyzing that data — discovering that 20% of the people got vaccinated between 5pm and 6pm when everything was closing.
ThoughtSpot can model the future based on the insight to come up with solutions: finding that if the vaccination site opened at 10am and closed at 7pm it could vaccinated 15% more people.
ThoughtSpot can help organizations to implement the strategy in a way that controls their ability to act. For example, ThoughtSpot can calculate how much more the organization will need to pay the vaccinators, he explained.
ThoughtSpot is making progress towards an IPO which it believes its customers will appreciate. As Nair said, “The last quarter was the first full one since the transition we are 21% in the cloud. We want 100% of demand from the cloud by July 2021.”
To satisfy the requirements for an IPO, the company must “be predictable and [we must complete our] transformation to the cloud. We will have $100 million to $150 million in ARR and growth of 40% to 50%. We will need to be good on margins and customer net retention,” he said.
Will ThoughtSpot Partnership Help Snowflake Stock?
I do not know whether the partnership between ThoughtSpot and Snowflake will add enough revenue to Snowflake’s top line to enable it to make analysts comfortable with its high valuation.
Analysts’ views of the company suggest that many see great growth potential for Snowflake. For instance, Deutsche Bank’s Patrick Colville boosted his price target to $300 based on his perception that Snowflake has a large market opportunity and “clear product/market fit.”
Other analysts think Snowflake’s valuation is too rich. Citi’s Tyler Radke cut his target price to $295, from $325 because he thinks Snowflake’s 2021 revenue guidance implies slower growth — “a deceleration of 38 percentage points in the company’s growth rate,” according to Barron’s.
Meanwhile Bernstein analyst Zane Chane is not bullish on the stock due to its “healthy valuation and macro/rate risk facing high-multiple growth stocks.” Canaccord Genuity’s David Hynes said that the stock “remains a valuation-based Hold.”
If Radke’s right, Snowflake needs to speed up its growth. Boosting profitability would also be good.
The next year will tell whether its partnership with ThoughtSpot can help with that.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
