TickerTalk Headlines for July 2nd
In this newsletter:
Snowflake Stock Rebounds, Flies Higher on AI Spending
Artificial intelligence (AI) data cloud provider Snowflake Inc. (NYSE: SNOW) has had a series of misfortunate events, ranging from an earnings miss to data breaches, that caused its stock to tumble to 52-week lows at $122.60 on June 25, 2024. However, the shares have been able to rally for four consecutive days following the low as the market reconsiders its sentiment and ponders whether the sell-off was overdone. Investors should take a closer look at the catalysts to consider stepping into some cheaper shares.
Snowflake Bets Big on AI
Snowflake has been ramping up its generative AI (GenAI) offerings, and it's starting to pay off. Snowflake CEO Sridhar Ramaswamy founded the AI-powered search engine Neeva and is a former Alphabet Inc. (NASDAQ: GOOGL) Google executive. Ramaswamy was appointed to spearhead and accelerate its AI initiatives. Snowflake continues accelerating investment in AI to enhance its offerings, including its Cortex large language model (LLM).
Data Warehousing: Snowflake Competes with Tech Giants
Snowflake operates in the computer and technology sector. Data warehousing enables companies to gather, store, organize, model, and integrate massive amounts of data in a central repository specially designed for reporting and analysis.
Snowflake competes with hyperscalers that provide data warehousing services, including Amazon.com Inc. (NASDAQ: AMZN) through its Redshift product, Microsoft Co. (NASDAQ: MSFT) through its Azure Synapse Analytics and Google BigQuery Cloud Data Warehouse service.
Snowflake’s Q1 Performance: AI Investment and Growth Metrics
On May 22, 2024, Snowflake reported fiscal Q1 2025 EPS of 14 cents versus 18 cents consensus analyst estimates. This was a 4 cent miss. However, the miss wasn’t due to any lack of customer demand. It was due to having to buy more AI GPU chips to support its AI initiatives.
Revenue rose 32.9% YoY to $828.7 million, confirming the company is in its hypergrowth stage. Total customers rose 21% YoY to 9,822. Million-dollar customers rose 30% YoY to 485 in the quarter. Snowflake grew its Forbes Global 2000 customers by 8% YoY to 709.
Snowflake's remaining performance obligations (RPO) grew 46% YoY to $5 billion, which ensures a long runway of future revenue and robust remand. The net revenue retention (NRR) rate was 128%. This means its customers spent 28% more in the quarter than a year ago. Product revenues climbed 34%, which, combined with the NRR, indicates the investment in GenAI is starting to pay off.
Lowered Margins and Mixed Guidance Trigger Snowflake Stock Slide
Snowflakes issued fiscal Q2 2025 product revenues of $805 million to $810 million, representing 26% to 27% YoY growth. The company issues fiscal full-year product revenues of $3.3 billion, representing 24% YoY growth. However, it lowered its non-GAAP operating income margin to 3% from its previous forecast of 6%. It also lowered its adjusted free cash flow margin guidance to 26% from 29%. There is a perception of a slowdown in growth as the 24% full-year product revenue guidance is a step down from the 33% YoY performance in fiscal full year 2024. Again, this is due to the accelerating spending on AI investments like GPUs.
Falling Wedge Breakout in SNOW Stock: Analyzing the Pattern
The daily candlestick chart on SNOW illustrates a falling wedge breakout pattern comprised of converging trendlines representing lower highs and lower lows. The stock slide commenced the following morning after its fiscal Q1 2025 earnings release. SNOW gapped up $168.25 and then proceeded to sell off, forming a gap and crap. Shares continue to cascade lower until they hit 52-week lows of $122.60 on June 25, 2024. A daily market structure low (MSL) triggered the breakout above $130.82, powered by a relative strength index (RSI) divergence low rising to the 56-band as shares rose to $141.49. Pullback support levels are at $27.07, $26.52, $25.61, and $24.50.
Snowflake Customers Targeted By Cybercriminals
Cybersecurity firm Mandiant released a report on June 10, 2024, indicating a cyber threat campaign targeting Snowflake's customer database for data theft and extortion. The report clarified there weren't instances of unauthorized access due to a breach in Snowflake's enterprise environment. Instead, all cases were traced back to compromised customer credentials. Since Snowflake was exonerated, shares didn't have an immediate reaction but continued to sink to 52-week lows after that.
Goldman Sachs Adds Snowflake To its Conviction List
Investment bank Goldman Sachs added Snowflake to its Americas Conviction List on July 1, 2024, propelling shares higher by nearly 5%. Analyst Kash Rangan cited the current levels as an attractive entry point. Rangan noted that CEO Ramaswamy will continue to accelerate product development, resulting in increased velocity and customer consumption, which will ultimately bolster free cash flow and top-line growth.
Snowflake analyst ratings and price targets are at MarketBeat. The consensus analysts' price targets have a 40.67% upside to $199.46.
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Complete Solaria, Senti, and POET: 3 High Volume Penny Stocks
High volume can indicate market strength, but volume is relative. Thirty million in traded shares doesn’t mean much if the average daily volume is higher. However, a volume spike to thirty million is a different story.
Volume spikes are a sign of piqued market interest, but their impact can be fleeting. Take GameStop, for example. It has seen spikes in trading volume, but they don’t last, nor the high share price they created. A sustained increase in volume is a sign of market strength that can sustain a rally.
Penny stocks Complete Solaria (NASDAQ: CSLR), Senti Biosciences (NASDAQ: SNTI), and POET Technologies (NASDAQ: POET) show volume spikes that have their stocks up double-digits. The question is if these are knee-jerk reactions and market mechanics at work or sustainable changes in sentiment and opportunities for penny stock investors.
Complete Solaria Volume Spikes Quadruple Digits: Hold
Complete Solaria is a small solar panel technology company and distributor operating in the US. The company stock has been trending upward from a recent bottom on word it would restructure its debt. The news confirming the deal sent the market up another 50% on a 7000% volume spike, suggesting a turning point has been reached.
Analysts are optimistic about this company. Only two analysts have ratings but are buyers and see a triple-digit upside from the current levels. Among the catalysts are an expectation for 50% year-over-year growth in fiscal 2025 and the potential for profitability in 2026.
The problem is that the company still has debt and may need help to regain traction. That and the massive spike in the share price have early investors running for the doors. The price action is up significantly but forming a bearish candle, confirming resistance at a critical technical level that will likely cap gains for the foreseeable future. Short interest is not a factor in the rally because interest was low at the last report, but it may have risen since.
Senti Biosciences Awarded $8 Million for SENTI0-202 Study: Buy
Senti Biosciences is a pre-clinical biopharma focused on cell and gene therapies. Its leading candidate is SENTI-202 for malignant tumors and acute myeloid leukemia. The news causing its volume to surge is about an award of $8 to help advance its technology, which is good news because Senti has virtually no revenue. The treatment is in early Phase 1 trials and may move on to its next step in 2025.
Senti Biosciences stock surged 100% on a 100x increase in volume and may continue higher. The market shows signs of bottoming at current levels, and the chart shows a strong entry signal. Analyst support is tepid but bullish, providing some incentive for the market. The single analyst rating under one-year-old is a Strong buy with a $6 price target or a 1000% upside from today’s price points.
POET Technologies is Turning a Corner: Buy
POET Technologies is not a new company. The business has been around for decades, advancing optical technology to coincide with the AI revolution. Its optoelectronic components are the first of their kind and combine optics and electronics onto a single semiconductor wafer. They are finding new demand in the data center and AI industry, where they are lowering costs while improving scalability. Among the news driving the stock today is a collaboration with Foxconn to build high-speed AI systems.
Shares of POET surged 140% in early April and are now up 35% to set a new intraday high. The price action shows active and growing support, which puts it on track to reclaim $3.50 soon. One analyst firm issued a rating within the last year; they rated the stock at Buy and saw it advancing more than 100% to $7.50. Assuming the company meets its expectations, its stock could easily reach that level. Two analysts forecast a 30% increase in 2025 revenue and may be underestimating the market. POET isn’t on the level of Advanced Micro Devices (NASDAQ: AMD), Micron (NASDAQ: MU), or NVIDIA (NASDAQ: NVDA), but their DC business is booming, and POET is playing in the same market.
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Pfizer Stock is Ready to Stage a Turnaround on GLP-1 Hopes
Pharmaceutical giant Pfizer Inc. (NYSE: PFE) has been trying to enter the weight-loss treatment trend dominated by GLP-1 drug makers like Ozempic and Wegovy makers Novo Nordisk A/S (NYSE: NVO) and Mounjaro and Zepbound makers Eli Lilly & Co. (NYSE: LLY). Pfizer had failed in its previous attempts to create a viable GLP-1 contender.
Pfizer operates in the medical sector. In addition to the incumbents Novo Nordisk and Eli Lilly, it competes with other GLP-1 developers, including Viking Therapeutics Inc. (NASDAQ: VKTX), Altimmune Inc. (NASDAQ: ALT) and Structure Therapeutics (NASDAQ: GPCR).
Pfizer Halts Lotiglipron Trials Due to Liver Toxicity Concerns
Pfizer had two promising GLP-1 drugs. However, it ended clinical trials in June 2023 for its second obesity and Type 2 diabetes mellitus treatment, lotiglipron. Lotiglipron was an oral GLP-1-RA contender with a once-a-day treatment that was seen as a viable contender to Ozempic. However, Phase 1 and Phase 2 clinical trial data indicated elevated transaminase enzyme levels, indicating the potential for liver dysfunction. To be clear, none of the enrolled participants reported liver-related side effects, symptoms, or liver failure.
Pfizer Discontinues Danuglipron Trials Due to High Dropout Rates
The company decided to continue forward with its twice-a-day formulation of danuglipron. However, on Dec. 1, 2023, Pfizer discontinued its mid-stage trials of danuglipron due to dropouts driven by high rates of side effects, including vomiting and nausea. Nearly half the patients dropped out at certain dosages due to harsh gastrointestinal side effects. The drug enabled 13% weight loss in week 32, which rivals Eli Lilly's oral drug, which hit 15% in week 36.
Pfizer CEO Hints at 3 Weight-Loss Drugs
During a Semafor event interview on June 24, 2024, Pfizer CEO Alfred Bourla noted that Pfizer is currently working on three weight-loss treatments. Pfizer decided to proceed with a new formulation of danuglipron that would be used once a day as a pill. The company will provide trial data for the once-a-day version of danuglipron in 2024.
Bourla didn't provide much more details, except that the company has two GLP-1 technology drugs and one non-GLP-1 mechanism in the works. The company is determined to get a piece of the medical weight-loss treatment segment.
PFE Stock Continues to Chop in a Descending Triangle Pattern
The daily candlestick chart for PFE indicates a descending triangle pattern. The news of Pfizer testing three weight-loss drug candidates peaked out its second attempt to break out of the triangle range at $28.45, as shares again fell to retest the flat-bottom lower trendline at $27.07. The descending trendline started at the $29.73 swing high on June 4, 2024, as shares tested the flat-bottom lower trendline four times thereafter. A third test of the descending trendline is underway at $28.12. The daily relative strength index (RSI) illustrates a bounce attempt at the 50-band. Pullback support levels are at $27.07, $26.52, $25.61, and $24.50.
Pfizer's Recovery from COVID-19 Revenue Decline: Q1 Performance and Future Outlook
Pfizer has been experiencing a steep decline in COVID-19-related revenues. The decline has been the primary driver of its falling revenues. Its Q1 2024 EPS was 82 cents, beating consensus EPS estimates by 31 cents. Revenues continued to fall 19.5% YoY to $14.88 billion, still beating the consensus estimates of $13.87 billion. The expected decline of its COVID-19 drugs Comirnaty and Paxlovid revenues were the key drivers for the fall. Non-COVID revenues climbed 11% YoY. The company is trying to recover from the normalization of COVID-19 revenues as it becomes more routine, like the flu shot.
Despite the revenue decline, Pfizer is on track to deliver at least $4 billion in net cost savings for 2024. The company reaffirmed its full-year 2024 revenue guidance of $58.5 billion to $61.5 billion and raised its adjusted diluted EPS guidance to $2.15 to $2.35, up from previous estimates of $2.05 to $2.25 versus $2.21 consensus estimates.
Pfizer CEO is Upbeat About Non-COVID-Related Performance
CEO Bourla was bullish on the company's non-COVID performance in Q1 2024. The company increased revenue from several commercial launches and acquired products from its Seagen acquisition. Robust YoY growth occurred for several of its key in-line brands, including the Eliquis, Prevnar, and Vyndaqel family of medicines. Oncology revenue contributions were strong from Xtandi, Padcev, Adcetris, and Ibrance.
Dr. Bourla concluded, “Overall, I am encouraged by a well-executed quarter, setting the tone for the year. Pfizer’s commercial leadership is focused on data-driven opportunities across several key growth brands, both in the U.S. and internationally, and we intend to build on this positive momentum in the quarters ahead.”
Pfizer analyst ratings and price targets are at MarketBeat. The consensus analyst price target of $35.86 implies a 28.15% upside.
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