Investing

My Snowflake Position is Up 33% in a Day—Here's What I'm Doing Next

Joey Frenette

Published: November 22, 2024 7:55 am

Snowflake (NYSE:SNOW) stock is fresh off its best day ever, melting up by nearly 33% in a single day. This explosive move comes a day after it reported incredible quarterly Q3 earnings results alongside rosy guidance. And while the chilling move was applaud-worthy, it’s worth noting that shares of SNOW are still well off their highs, still down more than 56% from its brief peak hit back in late-2021.

And while it’s hard to be a chaser of any sudden upside spike, I do think there’s still value in the name as investors and analysts rediscover the data storage platform that’s undergoing a profound AI transformation thanks to a slew of new products, partnerships, and, perhaps most importantly, its new chief executive, Sridhar Ramaswamy, an engineer and business leader who’s very well-versed in the field of AI apps.

While Snowflake has always been seen as quite an expensive stock with a forward price-to-earnings (P/E) multiple north of 150 times and a price-to-sales (P/E) multiple of over 12 times, one can’t help but feel more confident about the firm’s future as the benefits of the AI boom work their way across the enterprise software companies.

Key Points About This Article

• Snowflake stock just had its best day ever after strong earnings.
• Increased focus on AI and a new partnership with Anthropic could yield tremendous rewards.
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Snowflake stock’s latest surge is very Palantir-like

Indeed, we’ve seen just how powerful a force AI-driven demand was for Palantir (NYSE:PLTR), which saw its AI Platform (AIP) really take off in recent quarters. While Palantir is an entirely different kind of company, I still think there are striking similarities between the firm and Snowflake, a firm better known for its data warehouses and lakes.

Most notably, Palantir and Snowflake seem to be taking steps to better position themselves as powerful AI app enablers.

Whether they add to their AI strengths via strategic acquisitions or organic innovations, both companies are hungry and well-equipped to capitalize on the growing demand for custom-tailored AI applications. Once enterprise firms have capable AI chips, they’ll need to put them to use in ways that set them apart from the pack. Building such apps on top of a capable platform will be a must, as are having all the right tools to get the job done.

Additionally, Palantir did big business with government contracts but has since started setting its sights a bit more on the enterprise. Snowflake started at the enterprise and is looking to make a big pivot into the federal space. Snowflake’s Night Shift Development and more recent Datavolo acquisitions will allow the firm to better expand into America’s public sector, a new growth arena.

Here’s what I’m doing with my SNOW shares after the big move

While only time will tell if SNOW stock can extend its recent run, I can’t say I’m in a rush to sell any of my Snowflake shares. Not while Ramaswamy continues making incredibly wise moves. Whether we’re talking about making tuck-in acquisitions or landing strategic partnerships (Snowflake recently inked a deal with Anthropic), Snowflake’s new top boss is not wasting time when it comes to repositioning the firm with AI at the top of mind.

Undoubtedly, many of Snowflake’s recent deals have been focused on AI. As rates fall off into the new year, perhaps the pace of dealmaking could surge, allowing Snowflake to add even more firepower to its already impressive AI platform.

Perhaps most strikingly, however, is Snowflake’s Anthropic AI partnership, which will combine efforts for work on agentic AI, the next frontier in the AI boom. Also, having the Claude large language model (LLM) integrated into Snowflake’s platform is a huge plus for those in the Snowflake ecosystem. All considered, I view the Snowflake growth narrative as the best it’s ever been. As such, I’m hanging onto shares after the latest run despite the questionable valuation, which, I believe, can still be supported by an AI-driven growth spurt going into the new year.

The bottom line

Though I could be wrong, I do think Snowflake stock has room to run over the long haul. The latest 28% surge in sales growth seems to suggest the firm’s getting back on the right track.

With increased investment in AI initiatives and a recently announced strategic partnership with Anthropic, I’m excited about the possibilities as the firm looks to add to its recent gains and perhaps fuel a run closer to prior highs. Finally, I believe in Sridhar Ramaswamy, an AI visionary on a mission.