Major share purchases by company insiders, like executives and large shareholders, are often viewed as a vote of confidence in the stock's future. Their in-depth knowledge of the company's operations and strategy gives them a potential edge in understanding its true value - so when this well-placed group purchases company stock with their own money, it's generally viewed as a bullish indicator for the shares.
That brings us to the recent insider buying on tech heavyweight Snowflake (SNOW). Based out of San Jose, Snowflake is a cloud-based data software company. They offer a platform that enables storing and analyzing large datasets for various purposes like data science, business intelligence, and application development.
Commanding a market cap of $50.7 billion, Snowflake stock is down 22.6% on a YTD basis. The nosedive in the stock price this year is largely due to the unexpected resignation of former CEO Frank Slootman, who took the company public back in 2020.
New CEO Ramaswamy Buys SNOW Stock
On March 25, new CEO Sridhar Ramaswamy bought 31,542 shares of Snowflake at an average price of $158.52 per share for a total value of just over $5 million. Notably, with this purchase, the former Senior VP of AI at Snowflake now owns a stake of 0.0777% in the company.
Also last month, board member Mark McLaughlin bought more than 3,000 Snowflake shares worth $501,314 on March 6. The former Palo Alto Networks (PANW) CEO and current Qualcomm (QCOM) board chair was also the most recent Snowflake insider to buy shares before last month's activity, picking up roughly $300K worth of stock in May 2023 - like Ramaswamy, shortly after he was first appointed to the board.
So, are these insiders getting a bargain price on their Snowflake shares? Here's a closer look.
SNOW Beats on Earnings
For its latest quarter, Snowflake reported revenues of $774.7 million, which represented a healthy 32% year-over-year improvement. Adjusted EPS for the quarter came in at $0.35, up 150% from the previous year, and above the consensus estimate.
Net cash from operating activities was $344.6 million in the latest quarter, up 58.6% from the prior year. Overall, the company exited the quarter with a cash balance of about $1.8 billion, an improvement from the prior year's $939.9 million.
However, along with the CEO departure, Wall Street cast a cautious eye on Snowflake's revenue guidance. The company guided for $747.5 million in product revenue at the midpoint for the current quarter, falling short of the $770.1 million consensus.
What's Driving Growth at Snowflake?
Longer term, Snowflake seems well-positioned for growth. According to this report, the data warehousing market is forecasted to reach $43.45 billion by 2028. Another report is even more optimistic as it expects the market size to be $85.7 billion for data warehousing by 2032, clocking a CAGR of 11% between 2023-2032.
As part of Snowflake's commitment to product innovation, the company is evolving from a cloud-native, structured data platform to a more versatile one, aiming to become a comprehensive application platform for complex analytics.
Their Snowflake Marketplace facilitates app development, distribution, and monetization. Meanwhile, Unistore merges analytical and transactional data, eliminating the need for data movement. Streamlit empowers developers to build applications using their preferred tools with simplified data access and governance.
To rival privately held Databricks, Snowflake is developing Snowpark, a secure programmability platform that supports various languages like Python and Java. Snowpark generated an estimated $35 million in revenue in 2023, and is projected to reach $100 million in 2024.
Is Snowflake Stock a Buy?
Looking ahead, analysts expect SNOW to report revenue growth of 22% this fiscal year, even as EPS growth is expected to dip roughly 2%.
However, Wall Street remains upbeat about Snowflake stock overall. The consensus rating is a “Moderate Buy” overall, with a mean target price of $205. This indicates an upside potential of about 33.2% from current levels.
Out of 40 analysts covering the stock, 24 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating, 11 have a “Hold” rating, and 2 have a “Strong Sell” rating.
