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Snowflake Stock (NASDAQ:SNOW): This AI Stock Actually Looks Cheap

Nasdaq MSFT MicroSoft
3 years 3 months ago
To the untrained investor, Snowflake ( NASDAQ:SNOW ) stock may be one of the priciest stocks in the market right now. However, when you consider its financial trajectory and impressive position in the AI race, it becomes more apparent that Snowflake stock looks cheap compared to its growth prospects. Undoubtedly, AI stocks are all the rage these days, with chip stocks like Nvidia ( NASDAQ:NVDA ) hogging the headlines and capturing most of the investor euphoria. We must not forget about the software plays, though, as they may be next up to the plate once investors look to other places to find value in the wild world of AI. The AI Boom Has Just Begun, and It's Not Just About Nvidia! Nvidia stock boomed on unprecedented AI chip demand. Once consumers and businesses have the chips and AI firepower, they could go a while without buying more, especially for the firms that overordered. In that regard, investors shouldn't expect Nvidia to keep one-upping itself consistently. It's the AI play that we all have heard about non-stop of late. After the AI chip boom could come a software boom as firms look to harness the power of generative and predictive AI. Indeed, big-tech names have been leading the way on the front of software, with the FAANG cohort leading the way, pushing price-to-earnings (P/E) multiples toward the higher end of the historical range. The "Magnificent Seven" stocks, as MadMoney host Jim Cramer calls them, are wonderful tech companies that have a solid footing in the AI scene. Looking beyond big tech, though, I do see plenty of underappreciated AI growth stories, such as Snowflake, that may be next for a huge upside move as the AI rally continues. Snowflake Stock: An AI Stock to Play the Software Side of Things At this juncture, not only does Snowflake stand out as an AI software winner, but one that could catch investors and analysts off-guard in a similar way Nvidia did. It's hard to gauge the type of explosive growth that AI can bring to the table. The floodgates for AI really opened earlier this year when the ChatGPT headlines hit us from left, right, and center. With AI at its tipping point, we may see the "AI jolt" shift from hardware (chip plays) to data plays. Snowflake is a powerful company that stands behind the data cloud. Let's think about what goes into building a generative AI. Not only does a company need the hardware (think Nvidia chips), but they also need data, publically available and private. It's the private data that's more valuable and could help companies gain an edge when it comes to generative AI. Snowflake's data cloud not only helps firms more easily manage massive data sets, but its Data Marketplace can also act as a go-to place for people to transact one of the most precious resources in the AI age -- data. Arguably, private, proprietary data could be more valuable than AI chips themselves. There's private data that money can't buy, and it's the data advantage that could separate the haves from the have-nots in the world of generative and predictive AI technologies. Snowflake: Smart Partnerships Should Have Investors Excited Nvidia has been teaming up with a lot of firms these days. Everybody wants in on the AI action, and there's no better way than to make a deal with the visionary Nvidia CEO Jensen Huang. Snowflake and Nvidia announced a partnership at the latest Snowflake summit to help firms build LLMs (Large Language Models) using proprietary data in the Snowflake Data Cloud. Indeed, Nvidia also stands out to be a winner on the software side of the AI race. Regardless, I do think Snowflake faces more upside as a less-obvious AI stock that investors may still need time to better appreciate. Perhaps it'll take a profound quarterly beat for Snowflake stock to get the respect it deserves. For now, it's one of my favorite AI stocks on the software side. Aside from Nvidia, Snowflake also has an AI partnership with AI heavyweight Microsoft ( NASDAQ:MSFT ). Altogether, it seems like Snowflake is ready for the AI wave to give its stock a lift. Is SNOW Stock a Buy, According to Analysts? Turning to Wall Street, SNOW stock comes in as a Moderate Buy. Out of 32 analyst ratings, there are 25 Buys, six Holds, and one Sell recommendation. The  average Snowflake stock price target is $189.86, implying upside potential of 3.1%. Analyst price targets range from a low of $105.00 per share to a high of $235.00 per share. The Bottom Line on SNOW Stock Snowflake has the AI foundation to soar higher from here. While the stock trades at a lofty 26.1 times price-to-sales, that's not as expensive as it sounds, at least according to Scotiabank analyst Patrick Colville, who recently issued a massive upgrade on the stock (price target to $212 from $137). Mr. Colville sees $10 billion in product revenue, with free cash flow margins of around 30% in Fiscal Year 2029. I think Colville is right to give Snowflake the long view. Still, I'd argue there's room for further price target hikes should the AI boost hit Snowflake sooner rather than later! Disclosure 

Dividend Investors — Can a 2.4%-Yielding ETF be Better Than a 13%-Yielding ETF? 

Nasdaq MSFT MicroSoft
3 years 3 months ago
In a comparison to see if an ETF with a 13% dividend yield or one with a 2.4% dividend yield would be a better choice for dividend investors, it would seemingly be obvious that the ETF with the 13% yield would be the superior option. However, here’s why that’s not necessarily the case. Let’s take a look at the Global X SuperDividend ETF ( NYSEARCA:SDIV) and the iShares Core Dividend Growth ETF ( NYSEARCA:DGRO) to find out why the answer isn’t as clear-cut as it may seem once you go beyond the surface level. What are SDIV and DGRO? SDIV is the "super dividend ETF" from Global X. This ETF has about $784 million in assets under management (AUM) and, as mentioned above, yields a massive 13%. It does this by investing in an index composed of 100 of the highest-yielding equities in the world. Notably, SDIV pays out dividends on a monthly basis, as opposed to the quarterly basis that most stocks and ETFs pay on.  Meanwhile, DGRO is a dividend growth ETF from BlackRock’s ( NYSE:BLK ) iShares that yields a far lower 2.4% and also pays a dividend on a monthly basis. It invests in U.S. stocks with growing dividends, and it is much larger than SDIV, with $24 billion in assets under management.  So far, things are looking good for SDIV in this comparison, but let's look further. Comparing Their Holdings DGRO holds 430 positions, and its top 10 holdings make up just 25.9% of the fund, so this ETF offers investors plenty of diversification. Below, you’ll find an overview of DGRO’s top 10 holdings using TipRanks’ holdings tool. As you can see, this is a strong group of holdings, and most investors would generally agree that these are blue-chip stocks, whether they are mega-cap tech leaders like Microsoft ( NASDAQ:MSFT ), Apple ( NASDAQ:AAPL ), and Broadcom ( NASDAQ:AVGO ), international energy giants like ExxonMobil ( NYSE:XOM ) and Chevron ( NYSE:CVX ), or other well-respected stocks like JPMorgan Chase ( NYSE:JPM ).  Meanwhile, SDIV holds 100 positions, and its top 10 holdings account for just 13.4% of the fund, so this is a pretty diversified ETF with low concentration risk. Below, you’ll find an overview of SDIV’s top 10 holdings using TipRanks’ holdings tool. As you can see, its holdings look quite a bit different from those of DGRO. Most investors would be hard-pressed to find names that they recognize here, let alone names that are widely seen as blue-chip holdings.  In fairness to SDIV, it looks like DGRO is the clear-cut winner in this category, but it’s possible that some of these holdings are diamonds in the rough, so let’s give DRGO the edge for the better portfolio but move on to the next category, performance track record, to get a clearer picture of which is the superior ETF.  Comparing Their Performances Here’s where the rubber really meets the road in this comparison. When looking at the performance of both ETFs over time, a real difference begins to emerge. Looking at total return, which combines returns from price appreciation with dividends being reinvested, DGRO has been a pretty solid performer in recent years. As of the end of the quarter that ended in June, DGRO had a one-year total return of 11%. Going out to three years, it has posted an impressive annualized return of 13.6%. Over the past five years, DGRO has had an annualized total return of 11.1%. Finally, going back to its inception in 2014, DGRO’s total annualized return is 10.9%. As you can see, when combining returns from dividends and price appreciation, DGRO has consistently given its investors double-digit returns for a long time.    Now let’s take a look at SDIV’s track record compared to DGRO over the same time period. As of the end of the June quarter, SDIV’s total return over the past year was -8.1%. This means that even with its large dividend yield, investors have still lost 8.1% on their investments. Zooming out to three years, the results look a little better, with a three-year annualized total return of -2.7%. However, this means that investors still lost money and lagged the performance of DGRO by a significant margin. Over the past five years, SDIV has had an unsightly annualized total return of -10.4%. Even over a 10-year time frame, SDIV produced an annualized return of -2.3%, and since its inception in 2011, it has lost money with a total annualized return of -1.9%.  Disparity in Fees Despite losing money over each of these time frames and significantly underperforming both DGRO and the broader market, SDIV actually charges fees that are significantly higher than those of DGRO. SDIV has an expense ratio of 0.58% versus just 0.08% for DGRO. This means that an investor allocating $10,000 to SDIV would pay $58 in fees in the first year, while an investor putting $10,000 into DGRO would pay just $8. Fees add up over time, so the difference is even greater over a longer time horizon. For example, over the course of a decade, assuming a 5% return per year and that fees remain the same, the DGRO investor would pay $103 in fees, while the SDIV investor would pay a much higher $759. This large difference in expenses hardly seems justified, given SDIV’s underperformance.  Below, you can view a comparison of DGRO and SDIV using TipRanks’ ETF comparison tool, which allows investors to compare up to 20 ETFs at once based on a wide variety of customizable factors. The Winner Is... So, while DGRO investors made double-digit returns on a consistent basis, SDIV investors have actually lost money over the long run, even when its massive double-digit dividend yield is taken into account. This is why investors should look beyond just the attention-grabbing dividend yield and look at an ETF’s performance over time and why a dividend ETF with a 2.4% dividend yield like DGRO can be superior to a dividend ETF with a 13% dividend yield like SDIV. In this comparison between two dividend ETFs with very different approaches, I believe DGRO is the winner as the better choice for dividend investors (and all investors, for that matter).   Disclosure
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