Analyst Note| Julie Bhusal Sharma |
Snowflake reported an outstanding fourth quarter, as customer count increased by nearly 1,000 sequentially (to over 4,000 customers) and its net retention rate continued to exceed the exceptional 160% mark. That said, Snowflake’s revenue guidance for fiscal 2022 was more bearish than we expected. Nonetheless, adjustments we made for the year were countered with a boost from the time value of money, leading to our sustained fair value estimate of $204 per share for no-moat Snowflake. With shares down 2% to near $242 after results, Snowflake shares are now within 3-star, fairly-valued territory, which encapsulates a wide range of share prices given our very high uncertainty rating. As a reminder, our very high uncertainty rating is a function of Snowflake’s youth and Snowflake’s opportunity being a function of the scale and speed of workload migration to the cloud--which is nebulous in more ways than one to even the quintessential cloud players. Despite our very high uncertainty rating, the core of our Snowflake thesis is centered around very profound growth potential for Snowflake as a result of the sheer number of new data workloads that the cloud enables, its head start in a space with virtually zero direct competitors, and the roots of moaty switching costs and a network effect--which are taking hold.