Happy Friday Coachmen! After one turbulent week in the market, we hope that you’re all planning on having a relaxing weekend. The broader equity market has been rife with woes, however, the Coachman’s roster was filled with wins. Stay tuned for this week’s long-term pick.
“If you want a thing done well, do it yourself.”
- Napoleon Bonaparte
After trading down a majority of the week, markets moved sideways yesterday before retreating to lower levels in the earlier half of today’s session. Resultantly, the VIX is back at it again, hovering near 30 at the time of writing. With earnings season all but over and few market catalysts until next week, our eyes will be watching Tuesday’s economic updates such as both the manufacturing and services PMI numbers as well as the new home sales update, all slated for release around 10 AM.
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Our long-term pick - Short: Snowflake ($SNOW-NYSE)
For this week’s long-form piece, we have a short rating on Snowflake Inc, once a pandemic darling, Snowflake’s finances seem to be pushing it to a melting point. As for what the company does, its bread and butter are cloud data warehousing services. While this space was once innovative and sparsely populated, many tech giants have begun to vertically integrate similar services into their robust full-suite offerings. For a company that still makes no money after years of operation, losing between $178M, and $696M from 2018 onwards, Snowflake had timed their IPO perfectly, as they launched in September of 2020, which was coincidentally the peak of the mid pandemic QE unleashed by the Federal Reserve. It should be noted that these losses are increasing significantly higher on a YoY basis.
Furthermore, while their high debt and lack of profits may have once been considered sustainable during a period of “free money”, as market conditions worsen and financing costs rise, the company’s future looks extremely dire. Speaking of free money, their recent $800M acquisition of dashboarding platform Streamlit, seems like a last-ditch effort to hold onto relevancy. Additionally, their decision to make the platform free for all users compounds the aforementioned financing woes. All in all, as a company, Snowflake has not made any money since their IPO, or before - even as late as Q4 2021, their profit margins were sitting at an abhorrent -34.44% and as of Q1 2022, they posted a loss of over $132M. Although the company has begun to reduce losses, its runway has shortened tremendously over the past months and consequently, I am of the belief that it will never end up taking off as a result. Their most recent downward spiral has come after the 200-day MA crossed the 50-day, with no end in sight.
Chart of the Day: Gold's Priming for a Reversal