Daily Brief: Snowflake Delivered Good Cheer As Software Firms Look Ever More Appealing

Daily Brief: Snowflake Delivered Good Cheer As Software Firms Look Ever More Appealing

about 2 years ago3 mins

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Snowflake reported better-than-expected earnings earlier this week, and the software company’s investors were as giddy as kids celebrating Christmas come early.

What does this mean?

Snowflake provides data warehousing software that helps businesses crunch more numbers more quickly, and overloaded companies couldn’t get enough last quarter: Snowflake had 52% more customers than the same time last year, and 128% more customers that spent $1 million-plus in the previous 12 months. Mix in successful launches across a variety of international markets, and Snowflake’s revenue grew by a barnstorming 110%. The company’s revenue outlook for this quarter came in better than expected too, which meant investors could finally chill out: they initially sent its stock up 13%.

Snowflake stock
Source: Google Finance

Why should I care?

The bigger picture: Hedge funds are fans.

Stocks like Snowflake’s have been in high demand lately, with Goldman Sachs pointing out that hedge funds’ investments in the software sector hit a five-year high in October. That could be because companies are piling into software to make up for labor shortages right now, or it could be because it’s all but guaranteed that big data, cloud computing, and cyber security will be the bread and butter of future industry.

Betting on software

Zooming out: Low production, low demand.

Snowflake’s investors might just be glad the company isn’t in the hardware business, which has been subject to the whims of the unrelenting chip shortage this year. Just look at Apple, which had to make massive production cuts to its new iPhone back in October. Still, maybe a blessing in disguise: Apple admitted this week that demand for its new handset this Christmas mightn’t be as strong as it thought after all.

Unconvinced

Keep reading for our next story...

Luxury Goods Giant Hermès Is Set To Join One Of Europe's Biggest Stock Indexes

Hermes image

News emerged this week that Hermès is set to join the Euro Stoxx 50, and the luxury company could certainly get used to the sweet smell of success.

What does this mean?

Hermès – which is already listed on the French stock market – has had a dynamite year: demand for the company’s nice-to-haves has gone through the roof thanks to customers with places to go, people to see, and savings to spend. That’s in turn gone down well with investors, who have sent its share price up 90% this year.

Cue the Euro Stoxx 50: the index – which is made up of the 50 biggest listed companies by value in the eurozone – is regularly updated to replace stocks whose values have fallen with those whose have risen. And since Hermès has proved its worth, it’ll finally claim a spot in the esteemed index for itself at the end of the month.

Hermes outperformed

Why should I care?

The bigger picture: Luxury’s going digital.

If Hermès is looking for another way to lift its share price, might we suggest it leans into NFTs. The luxury industry has been fashionably late to this particular party, but the arrival of Gucci’s first NFT could be a sign that companies are finally showing up. And given that Morgan Stanley reckons NFT sales could represent up to 7% of luxury companies’ revenue by 2030, the prospect is bound to put a smize on their faces.

For markets: Follow the money.

The UK’s key stock index – the FTSE 100reshuffled its stock holdings this week too, replacing cybersecurity firm Darktrace and chemicals company Johnson Matthey with veterinary medicine producer Dechra Pharmaceuticals and electronics distributor Electrocomponents. Keen-eyed investors might’ve spotted an opportunity here: billions of dollars are invested in funds that passively track the FTSE, and those funds are forced to invest in any newly introduced stock. So if those investors bought into Dechra and Electrocomponents ahead of this week’s rebalancing, they might’ve earned a windfall once the passive funds adjusted to reflect the updated index.

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