To The Moon

Two years ago, cloud service companies were so favored in the whole market. As long as they were associated with "XaaS", the stock price in the secondary market could rise rapidly. At this stage, many imaginative companies were newly listed, which were popular among some innovative funds.

Among them,$Snowflake(SNOW)$It is almost the leader of the whole industry. On the eve of IPO, the IPO range of $75-85 was raised to $125, with a market value of more than $70 billion, and even attracted Buffett's$Berkshire Hathaway(BRK.B)$Participation. On the day of listing, it created a "double miracle" that soared to $319.

Time has changed. With the announcement of the financial report for the first quarter of fiscal year 2023 ending April 30, 2022, SNOW plunged 13% after hours, and its share price officially broke.

As far as the quarterly results are concerned,

• Total revenue was 422 million US dollars, an increase of 85% year-on-year, and fell to double digits for the first time, but slightly better than the market expected consensus of 414 million US dollars;
• Non-GAAP's gross profit was $300 million, better than the expected consensus of $290 million;
• Non-GAAP has an operating profit of 1.7 million US dollars and an expected loss of 7.6 million US dollars;
• Non-GAAP's EBITDA is $11.6 million and is expected to be $3.6 million.
• But from the GAAP perspective, EPS is-0.53 USD, and it is expected to be-0.51 USD.

But the company was more conservative about its forecast for the next quarter, and lowered its guidance because some customers' revenue was lower than expected. The company expects Q2's product revenue to be between 435-440 million US dollars, with a year-on-year increase of 71-73%, and the growth rate further declines, while the adjusted operating profit is-2%, and the market expectation consensus is 0.3%.

At the same time, the company expects the annual revenue in fiscal year 2023 to be 1.89-1.9 billion US dollars, with a year-on-year growth rate of 65%-67%, of which the gross profit margin of products is 74.5%; Operating profit was 1%.

Obviously, this earnings season, the market has shown no mercy to companies that have lowered their expectations, so it is not surprising that they plunged by 14% before the market.

SNOW has always been the vane of the cloud industry, and its valuation multiple has always been high. The market sales rate and EV/Sales even reached triple digits at the initial stage of listing, and then remained in double digits. This after-hours break ,According to the company's expectation in fiscal year 2023, the market sales rate is still 17 times.

In fact, we can only see some clues from the performance of Q1-

Revenue and profit can still exceed expectations, especially during the inflation period when hardware costs and labor costs go up, and the company's operation has been kept efficient, which is a good side.However, the growth of customers is slightly less than the consensus expected by the marketTherefore, the deferred income that can reflect the future income expectation can barely meet the market expectation, which is less than the increase of income and profit.

The retention rate is still high, indicating that users have good stickiness before. After all, most of them are enterprise users. Whether it is technology adaptation or migration cost, it is still very troublesome to replace cloud service infrastructure. However, executives also explained in the telephone conference that because of its customers they are facing cost management. And be more cautious about spending in this areaTherefore, it also affects the expectations of SNOW itself.

In addition,SNOW's comsuption model, maximizing the income of users per use, also makes users more sensitive in cost.

In the comparison of similar companies, SNOW may not have advantages, and it is still a high-valued stock that needs to be "scared" at present.

Now the break of SNOW also means that$ARK Innovation ETF(ARKK)$ are all down.