4. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 73
Snowflake Inc. (NYSE:SNOW) stock has gained strongly in the past few months after an average start to 2021. Analysts have been upgrading their price targets and upgrading the stock in recent weeks as positive third quarter results add to the positive momentum around the firm. In early December, Frank Slootman, the CEO of Snowflake Inc. (NYSE:SNOW), said that pent-up pandemic demand and strong trends towards data in the clouds had provided Snowflake Inc. (NYSE:SNOW) with a “potent cocktail” for growth in the coming years.
The third quarter results of Snowflake Inc. (NYSE:SNOW) show a Revenue Retention Rate of 173%, increasing margins, and strong research spend in a growing market that all add to the list of long-term growth catalysts for the company.
Here is what RiverPark Funds has to say about Snowflake Inc. (NYSE:SNOW) in its Q1 2021 investor letter:
“We also established a position in Snowflake during the quarter. Snowflake offers cloud-based data storage and analytics, generally termed “data warehouse-as-a-service.” The data warehousing market—created by the massive, growing amount of user, customer, and account data and the need to search and analyze it—has historically stored its data on physical servers located on-premises. The cloud data platform market—storing data off-premises on cloud servers—is a relatively new $70 billion+ market. Significantly, incremental warehouse data capacity and renewals are expected to be driven by and to the cloud, with more than 75% of databases in the cloud by 2022.
Snowflake requires absolutely no infrastructure management from its users, is fully scalable for each customer, runs on Amazon, Microsoft, or Google cloud platforms, and most critically, Snowflake helps companies analyze their data. The company also has a unique, customer-aligned billing model based on usage. All of which has led to Snowflake being among the leaders of this highly fragmented market, posting 124% revenue growth last year. SNOW’s growth comes from the combination of more customers—which grew 73% last year—and customers buying more services—the company boasts an amazing 150%+ net customer retention. The company’s growing scale has also led to increasing gross margin and operating leverage, up 1,100 basis points and 8,200 basis points, respectively, over the past two years. The company has guided to FCF break-even this year, and with the company’s capital expenditure-light model—Snowflake uses the public cloud for hosting—we expect FCF to grow much faster than revenue growth, which we forecast to grow comfortably more than 50% per year for the next several years. Additionally, we have great confidence in the SNOW management team, which previously had an enormously successful run guiding one of our other core Cloud software holdings ServiceNow.”
