Your portfolios in brief
Founded in 2012, Snowflake (SNOW) is a global company specializing in cloud-based data hosting platforms. It operates in several countries and employs a large number of people worldwide.
- Highlights in 2023
Annual guidance: Snowflake has demonstrated impressive growth, with forecasts for revenues and profits on the rise.
Sales for the quarter: The company reported third-quarter sales of $698 million, up 34% and $19 million above analysts' estimates.
Adjusted earnings per share: For the third quarter, adjusted earnings per share were 25 cents, up 127% and nine cents above estimates.
Net revenue retention rate: An impressive 135% in the third quarter.
Fourth-quarter revenue forecast: Between $716 million and $721 million, with the mid-point around $22.5 million above estimates.
-Why is this a stock to watch?
Snowflake, a major company in the cloud computing sector, ended last year on a positive note. After a difficult period in 2022 and 2023, the cloud computing industry could be in for an exceptional 2024. Gartner forecasts that global spending on public cloud services will increase by around 20% in 2024, reaching almost $680 billion. Cloud infrastructure and platform services, driven by generative artificial intelligence, are expected to lead this growth.
Snowflake ended 2023 with a rebound of almost 39%, although this was less than the 43% rise in the NASDAQ index. Nevertheless, Snowflake remains well positioned in a rapidly expanding AI-driven market.
The California-based company has introduced several innovative services, such as Snowpark and Streamlit, which are just beginning to be rolled out to customers. These services fuel a new AI-powered application development ecosystem. In 2023, many customers focused on optimizing their use of Snowflake, resulting in product sales growth of "only" 34% in the last reported quarter. However, the company's management believes that the majority of these optimizations are now behind them, paving the way for a possible re-acceleration in growth in 2024.
-Conclusion
At Pratte Portfolio Management, we firmly believe in Snowflake's potential. Holding this stock in our portfolio has been a wise decision, and we look forward to seeing what the future holds for this innovative company. Snowflake represents a major opportunity in the fast-growing cloud computing and AI sector, despite its high valuation and volatility. It's a stock to watch closely for 2024.
Markets in brief
Monday
American markets were closed on Monday for the Martin Luther King vacation.
Tuesday
Dow: The index lost 0.62% to close at 37,361.12 points.
NASDAQ: The NASDAQ index fell by 0.19% to close at 14,944.35 points.
S&P 500: The S&P 500 index fell 0.37% to close at 4,765.98 points.
The recent stock market session was marked by the significant influence of rising bond yields on equity markets, as Spartan Capital's Peter Cardillo pointed out. This trend was exacerbated by cautious statements from Chris Waller, Governor of the Federal Reserve (Fed), who stressed the need for a measured approach to interest rate developments. In a speech in Washington, Waller expressed a reluctance to cut borrowing costs quickly, despite a robust economy and inflation stabilizing at around 2%.
The Fed's cautious stance was reflected in market expectations, with the probability of a rate cut as early as March falling from 77% to 65%. At the same time, yields on ten-year Treasuries climbed to 4.06%, from 3.93% at the previous close, and short-term rates also rose.
The session was also influenced by the drop in the New York area's manufacturing activity index (Empire State) in January, reaching its lowest level since the start of the pandemic in May 2020.
- Stockss in brief
Boeing (-8%): Boeing suffered a significant fall of almost 8%, dropping to $200.51. Ongoing problems with the 737 MAX 9 model and regulatory decisions had a major impact on the share price.
Morgan Stanley (-4.20%): Morgan Stanley saw its share price fall by 4.20% to $85.93. This drop was due to exceptional charges related to lawsuits for breach of confidentiality.
Synopsys (+3.09%): Synopsys was up 3.09% to $509.68, following the announcement of its intention to acquire Ansys for $35 billion.
Spirit Airlines (-50.5%): Spirit Airlines plunged 50.5% after a federal judge blocked its acquisition by JetBlue Airways for $3.8 billion.
Goldman Sachs (+0.72%): Goldman Sachs was up 0.72%, closing at $380.48, thanks to higher fourth-quarter earnings.
- Inflation in Canada
In December 2023, Canada's inflation rate rose to 3.4%, up from 3.1% in November. According to Statistics Canada, this increase was mainly due to higher gasoline prices than a year earlier. Other factors, such as higher air fares and fuel oil prices, also played a role in the rise in the Consumer Price Index.
Grocery prices rose by 4.7% in December, unchanged since November. The real estate sector is not to be outdone, with rents continuing to rise, particularly in Ontario, British Columbia and Quebec. For 2023 as a whole, the average inflation rate was 3.9%, marking the second-highest level since 1991. In Quebec, the average inflation rate for 2023 was 4.5%. Despite this rise in December, the Bank of Canada's core inflation measures remained relatively stable, and this fluctuation should come as no surprise to the central bank, which anticipates price variations in the months ahead.
- China: economic growth at its lowest in 30 years
In 2023, China experienced its slowest economic growth in 30 years, excluding the COVID-19 period, with GDP growth of 5.2%. This was due to a crisis in the real estate sector and a slowdown in consumption. Despite the lifting of health restrictions at the end of 2022, economic recovery has been hampered by high youth unemployment and a global slowdown. The real estate sector, crucial to the Chinese economy, is suffering from falling prices and more difficult access to credit for developers. The fall in property prices in China's main cities in December indicates a worsening situation, particularly in small and medium-sized towns.
China's economic recovery in 2023 was described as disappointing, requiring more robust support for economic activity in 2024. Retail sales, a key indicator of household consumption, slowed in December, and industrial production accelerated slightly. The unemployment rate rose slightly in December, with a particularly high rate among young people aged 16 to 24.
Wednesday
Dow Jones: The index fell by 0.25% to close at 37,266.67 points.
NASDAQ: The index gave up 0.59% to close at 14,855.62 points.
S&P 500: The broad index fell by 0.56% to close at 4739.21 points.
The session was marked by an adjustment in expectations of a rapid interest rate cut by the US Federal Reserve following stronger-than-expected economic data.
Bond yields continued to climb, reaching a monthly peak of 4.10% for ten-year bonds. This rise in yields put downward pressure on equities, in response to stronger-than-expected US retail sales in December, up 0.6% rather than the 0.4% expected.
Peter Cardillo of Spartan Capital felt that a March rate cut was now out of the question, given these dynamic figures and recent comments from Fed members. Bets on a Fed rate cut as early as March fell to 56% from 80% last week. The Fed's Beige Book revealed stable or slightly rising activity in eight out of twelve regions, indicating a rebalancing of the labor market after more than two years of labor shortages.
- Stockss in brief
Boeing (+1.27%): Boeing rebounded after a significant fall the previous day, following the inspection of its Boeing 737 MAX 9.
Tesla (-1.98%): Tesla suffered a decline after cutting prices on some of its models in Europe and China.
Spirit Airlines (-22.47%): Spirit Airlines shares fell drastically after the rejection of a proposed takeover by JetBlue.
Schwab (-1.34%): Schwab posted a decline after disappointing quarterly results.
Albermale (-4.17%): Albermale saw its share price fall following the announcement of investment cuts and restructuring.
Thursday
Dow: The index rose 0.54% to close at 37,468.61 points, rebounding from an earlier loss of 143.72 points in the session.
NASDAQ: The index gained 1.35% to close at 15,055.65 points.
S&P 500: The broad index gained 0.88% to close at 4780.94 points, close to its closing record.
Technology companies, led by Apple, gave the market a significant boost, driving the main indices into positive territory. Since the start of the year, the NASDAQ and S&P 500 have been positive, rising by 0.30% and 0.23% respectively. However, the Dow Jones has performed less well, down 0.59% for the year.
Technology stocks got a boost from the TSMC (Taiwan Semiconductor Manufacturing Co) update, which brought plenty of optimism about future prospects for semiconductors and artificial intelligence, greatly influencing trading in these companies. "We can see the impact of this news on share price trends," said Ross Mayfield, investment strategy analyst at Baird.
"As the macro environment evolves this year, if the wind continues to blow in AI's favor, it will be reflected in the most AI-dependent stocks," added Mayfield.
The yield on 10-year Treasury bonds climbed to 4.14% on Thursday, following recent employment data indicating persistent tension in the labor market. Initial jobless claims were 187,000 for the week ending January 13, down 16,000 from the previous period, the Labor Department reported. This was stronger than economists' consensus estimate of 208,000, according to figures gathered by Dow Jones.
- Stockss in brief
Apple (+3.3%): Apple shares rose significantly, contributing to the NASDAQ's positive performance.
Taiwan Semiconductor Manufacturing Co (+9.8%): The world's largest chipmaker saw its shares rise after reporting better-than-expected results.
Spirit Airlines (-24%): Spirit Airlines shares continued to fall following the blocking of its acquisition by JetBlue, resulting in a drop of almost 70% this week.
Boeing (+1.27%): Boeing rebounded from a decline the previous day, following the inspection of its Boeing 737 MAX 9.
Tesla (-1.98%): Tesla's share price fell following the announcement of price cuts for some of its models in Europe and China.
- Rising oil prices amid growing tensions in the Middle East
Oil prices rose sharply on Thursday, boosted by escalating tensions in the Middle East. This follows US strikes against the Houthis in Yemen and clashes between Iran and Pakistan. North Sea Brent crude for March delivery rose by 1.56% to $79.10 a barrel, while US West Texas Intermediate (WTI) for February gained 2.09% to $74.08.
These increases came against a backdrop of US data showing a larger-than-expected drop in crude oil reserves, as well as an unexpected rise in gasoline inventories. Normally, such statistics would have led to lower prices, but geopolitical events prevailed.
Tensions in the Middle East, including attacks in the Red Sea and recent military action, have heightened fears of a possible disruption to oil supplies, contributing to higher prices on world markets.
Friday
S&P 500: The index was up 0.2% at the start of the session, approaching the closing record of 4,796.56 set in January 2022 and its intraday record of 4,818.62 points.
Dow: the index opened up 0.28%.
NASDAQ: The index was up 0.9% at the start of the day.
After a hesitant start to 2024, markets rebounded, with the S&P 500 and NASDAQ erasing their losses of 2024. This recovery was spurred by major advances in the technology sector, notably after Bank of America upgraded Apple shares, which recorded their biggest one-day rise since May 5, 2023.
Following a 19% loss in 2022, the S&P 500 rebounded in 2023 with a 24% gain, as the economy avoided the expected recession and inflation eased, allowing the Federal Reserve to pause its interest rate hikes. Although the market almost reached a record after a vigorous rally in the fourth quarter, it ultimately fell short. There was a slight slowdown in early 2024, as investors took profits on Big Tech leaders such as Apple.
However, in recent days, investors have reaffirmed their interest in these technology leaders. If the S&P 500 closes at a record high today, it would confirm that the stock market is officially in a bull market that began in October 2022. The S&P 500 has risen more than 33% since that low.
