Snowflake's Price Action Off Q3 Print Shows Why Timing Is Everything With Earnings

Zinger Key Points
  • When a company trades at an outlandish price-to-earnings ratio, guidance must be super strong, and it was not.
  • “The main thing to remember is that some money managers still need to put money to work and this may be a good candidate,” says Dennis Dick.
Snowflake's Price Action Off Q3 Print Shows Why Timing Is Everything With Earnings

When it comes to earnings reports, it is not always so much what the results are, but when they are announced. In other words, if a company has a poor report or tepid guidance, but the market has good performance, the Street may treat it much better.

The aforementioned scenario best describes the price action in the cloud data company Snowflake Inc SNOW, which is the PreMarket Prep Stock of the Day.

It's Just Like All The Others: Similar to all the other growth technology companies that traded to outrageous levels with a ridiculous price-to-earnings ratio, Snowflake came crashing down. The issue made its all-time high in December 2020 at $429 and did not bottom until June 2022 at $110.47

From peak to trough, that is a decline of 74%.

November Price Action: On Nov. 9, the issue put in an intermediate low at $122.77, rebounded to $168 in only four days and backed off. Heading into Wednesday’s after-hours report, the issue ended the session at $142.90.

Snowflake's Q3 Beat, Modest Guidance: After the close, the company reported quarterly earnings of 11 cents per share, which beat the analyst consensus estimate of 4 cents by 175%. This is a 175% increase over earnings of 4 cents per share from the same period last year.

Also, the company reported quarterly sales of $557 million, which beat the analyst consensus estimate of $539.1 million by 3.32%. This is a 66.55% increase over sales of $334.44 million in the same period last year.

When a company trades at an outlandish price-to-earnings ratio (forward P/E of 400), guidance must be super strong, and it was not. Snowflake forecasts FY23 product revenue of $1.919 billion-$1.924 billion, which surrounded the Street's estimates.

PreMarket Prep's Take: Following a volatile after-hours session with a range of $122.45-$147.31, the issue was trading in the mid-$137 handle. That was $15 off the premarket low.

“They already came in and bought the dip in this one when it was down $20,” said co-host Dennis Dick. “The main thing to remember is that some money managers still need to put money to work and this may be a good candidate.”

Dick emphasized that his thoughts on the issue were from a day trading perspective only and that he would not be adding the issue to his long-term portfolio,

SNOW Price Action: In a frantic first 5 minutes of trading Thursday, the stock opened higher ($144.51 vs. $142.90), then bolted to $150.79.

Snowflake ultimately gained 7.8% Thursday, closing at $154.04. 

The discussion on the issue from Thursday’s show can be found here:

Photo via Shutterstock. 

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