Snowflake, Inc. (SNOW) has experienced fluctuations in its value over the past eight months, despite overall solid earnings and a rebound in the past few weeks. The company has underperformed the S&P 500, declining approximately 6.1% compared to the S&P’s gain of about 23.9%. Despite a dip in performance, hedge funds and institutions were actively buying the stock in the first quarter. The cloud-based data warehousing company achieved a ranking of four on the WhaleWisdom Heatmap.
Snowflake provides software solutions to customers worldwide and is known for its data warehouses, database architecture, and query optimization. After an impressive initial public offering in 2020, Snowflake continued an upward climb. However, while the company continues to expand its customer base, the shares fell sharply.
Hedge Funds and Institutions Are Active
Snowflake, Inc. has received positive attention from both hedge funds and institutions. Hedge funds increased their aggregate 13F shares held to approximately 110.0 million from about 46.2 million in the first quarter, an impressive increase of about 138.3%. Of hedge funds, 80 created new positions, 47 added to existing holdings, 19 exited, and 22 reduced their stakes. Institutions raised their aggregate holdings to about 176.4 million from 75.9 million, an overall increase of approximately 132.4%.
Mixed Multi-year Estimates
Analysts expect to see revenue rise over the next four years, increasing growth from 2022 to 2025, spanning approximately 48.0% to 88.3%. These estimates would generate roughly $1.1 billion in revenue by January 2022 and $4.4 billion by January 2025. In addition, year-over-year earnings growth is predicted between 2022 and 2024. However, estimates are not quite as favorable as earnings slowly move toward the positive. Earnings are expected to narrow to a loss of $0.14 by 2024, improving from a loss of $0.58 in 2022.
Analysts Focus on both Short and Long Term
Despite first-quarter revenue and a favorable long-term product revenue forecast, analysts are cautious regarding Snowflake’s current valuation. Morgan Stanley’s Keith Weiss acknowledged a significant opportunity in the cloud-based data management market and gave Snowflake a $270 price target and Equal-Weight rating. Brent Thill of Jefferies Group raised Snowflake’s price target to $250 from $235 due to the considerable customer growth seen in the first quarter.
Optimism Beyond 2021
After many highs in 2020, so far, 2021 brought its share of tough months for Snowflake. However, hedge funds are buying, and analysts are optimistic for the long-term future. Year-over-year growth is anticipated to continue, and a strong market for cloud services is encouraging for patient investors.