PreMarket Prep Stock Of The Day: Snowflake

There are other factors besides a company’s earnings report that can influence the post-print price action. On some occasions, they can work in favor of the company and other times not.

For example, Snowflake Inc. SNOW is having a good day off its third-quarter earnings print, but one has to consider how it would be trading under different circumstances.

Market Environment: Although the major indexes are firmly in the green, it was rough sledding on Tuesday and Wednesday. Whether it was the “hawkish” tone of Federal Reserve Chairman Jerome Powell testifying on the Hill or the unknowns be of omicron variant, many indexes had their worst two days in months.

Overhead Supply: When an issue is breaking out to new highs, everyone is a winner. When an issue sharply retreats from it, later buyers to this issue end up being bagholders. Instead of thinking how much money they can make, they're hoping for a scratch or eke out a small profit on a rebound.

Only 10 days ago Snowflake made its all-time at $405 and 11 days ago posted its all-time closing high at $401.89. It ended Wednesday’s session just off its low for the day ($305.61) at $311.

Q3 Report: After the close on Wednesday, the company reported GAAP EPS of $(0.51), which may not compare to ($0.06) estimate. What the Street is applauding is the sales beat of $334.44 million, ahead of the $305.57 million estimate by a nice margin.

Also, the company expects fourth-quarter product revenue of $345-$350 million, which exceeded current Wall Street estimates. Off the solid report and guidance, several analysts raised their price target for the issue.

PreMarket Prep Take: When the issue was being covered on the show, it had already established its after-hours/premarket high ($365) and had retreated to the $355 area. Keep in mind that was over $40 above its closing price from Wednesday.

Co-host Dennis Dick's immediate reaction was to sell it.

“The good news is that it is holding fairly well up here," Dick said. "The bad news is that it is bagholder central. If I was long it, I would sell, this is a gift rally.”

The discussion on the issue from Thursday’s show can be found here:

Price Action: Following the higher open, it rallied to $354.50 and reversed course. The ensuing decline took the issue to $328.61 and reversed course once again.

The rally off that low allowed the issue to make a new high for the session, closing at $360.28.