For Immediate Release Chicago, IL – October 31, 2023 – Today, Zacks Investment Ideas feature highlights Nasdaq 100 ETF QQQ, Russell 2000 Index ETF IWM, Netflix NFLX, Microsoft MSFT and Nvidia NVDA.
eBay (NASDAQ: EBAY) is scheduled to report its fiscal Q3 2023 results on Tuesday, November 7. We expect the stock to edge past the consensus estimates of revenues and earnings. The company surpassed the expectations in the last quarter, with net revenues increasing by 5% y-o-y
Chinese technology giant Alibaba said on Tuesday it has updated its artificial intelligence (AI) model Tongyi Qianwen and released a suite of industry-specific AI models amid an intensifying AI race among tech companies.
Cloud-based data warehousing company Snowflake (
NYSE:SNOW
) has been on a remarkable revenue growth trajectory in recent years. However, Snowflake's stock hasn’t surged like other
AI stocks this year, as its expensive valuation has pushed investors away. Nonetheless, with cloud spending increasing again, Wall Street remains highly upbeat on Snowflake's long-term cloud and AI prospects, rating it a Strong Buy with plenty of expected upside. Like most analysts, I am bullish on Snowflake stock, too.
Impressive Revenue Growth Trajectory
Snowflake has quickly emerged as a significant player in the data warehousing space, revolutionizing how businesses manage and analyze their data. What differentiates Snowflake is its highly flexible and scalable platform for data analytics and storage. Its efforts are reflected in its rising product revenue growth in recent years.
Notably, Snowflake's product revenue, which accounts for a chunk of its total revenue, has increased from $96.7 million in Fiscal 2019 to $1.94 billion in Fiscal 2023. The company expects to generate ~$10 billion in product revenue by Fiscal 2029.
In Q2 Fiscal 2024, Snowflake’s product revenue grew 37% year-over-year to $640.2 million. Perhaps more impressive is Snowflake's increase in customers (those with more than $1 million in trailing 12-month product revenue) to 402 in the second quarter from 116 in the same quarter in Fiscal 2022.
This rapid expansion may assist the company in meeting its Fiscal 2029 product revenue target. Furthermore, its free cash flow margin is expanding substantially, which is a positive sign for a growing company in a highly-competitive market.
Snowflake doesn’t have its own cloud infrastructure platform yet, but it has collaborated with top cloud providers like
Amazon’s (
NASDAQ:AMZN
), AWS,
Alphabet’s (
NASDAQ:GOOGL
) Google Cloud, and Microsoft’s (
NASDAQ:MSFT
) Azure to expand its customer reach.
The Future Looks Bright
According to the
International Data Corporation, public cloud spending globally could grow at a compound annual growth rate of 20% to reach $1.35 trillion in 2027. Snowflake remains poised to take advantage of this phenomenal growth. With AI moving “beyond enterprise boundaries,” according to CEO Frank Slootman, he believes that data sharing "makes Snowflake uniquely positioned to enable AI workloads.”
Sharing the same optimism, on October 4, capital market company Loop Capital believes Snowflake is poised to reap the benefits from the "
emerging AI opportunity as it aggressively builds out its platform.” Snowflake's focus on innovation to introduce new products into the market also impressed the firm, with Loop Capital maintaining its Buy rating with a price target of $195 for SNOW.
Interestingly, Snowflake isn’t laying off workers to cut costs. Amid macroeconomic headwinds, most of the big
tech giants reduced their workforces substantially this year. Meanwhile, Snowflake anticipates hiring 1,000 new employees in Fiscal 2024.
Looking ahead, the company expects third-quarter product revenue growth of around 28% to 29% in the range of $670 million to $675 million. Snowflake hopes to achieve a strong close to Fiscal 2024 (ending Jan 31, 2024), with product revenue growth of 34% year-over-year to $2.6 billion.
Meanwhile, analysts predict total revenue of $714.0 million and earnings of $0.16 per share in the third quarter. Total revenue for Fiscal 2024 is forecast to jump 33.3% to $2.75 billion, further increasing to $3.6 billion in Fiscal 2025.
Compared to a
loss of $2.50 per share in Fiscal 2023, analysts also expect Snowflake to report a profit of $0.70 per share in Fiscal 2024. Earnings could further rise to $1.05 per share in Fiscal 2025.
So, the stock trades at 136 times forward earnings, based on Fiscal 2024 earnings growth estimates. With this steep valuation, the risk is certainly high, but investors may be overlooking Snowflake's growth prospects in
data analytics, cybersecurity, and AI, all of which are rapidly evolving markets.
Is SNOW Stock a Buy, According to Analysts?
Turning to Wall Street, TipRanks rates Snowflake stock as a Strong Buy now. Out of the 24 analysts covering the stock in the past three months, 19 rate it a Buy, and five say it’s a Hold. The
average SNOW stock price target of $192.60 implies 33.6% upside potential. The target price ranges from a high of $215 to a low of $160.
The Bottom Line on Snowflake
For now, I believe Snowflake is an overlooked AI stock that has the potential to capitalize on the growing opportunities in cloud computing and AI. As the importance of data-driven decision-making becomes more evident, Snowflake's role in simplifying efficient data analytics and storage will be highlighted, boosting its revenue and profits.
Its innovative platform, coupled with strategic partnerships and rapid revenue growth, positions Snowflake as a company to watch as the AI niche progresses. Hence, I share Wall Street’s enthusiasm for Snowflake’s stock.
Disclosure
Apple on Monday introduced new MacBook Pro computers and three new chips that will power its laptops and desktops, and the company said it had redesigned its graphics processing units (GPU), a key part of the chip where Nvidia dominates the market.
If you’re just starting out as an investor and looking for some foundational choices to build your portfolio around, the iShares Core S&P Total U.S. Stock Market ETF (
NYSEARCA:ITOT) looks like a great building block to get started with. This $42 billion juggernaut from BlackRock (
NYSE:BLK) offers tremendous diversification, an ultra-cheap expense ratio, and a strong track record of long-term performance, all in one convenient investment vehicle.
I’m bullish on ITOT as a long-term portfolio building block based on these factors. Even if you are a longtime investor with many years of experience in the markets, ITOT can still be a good choice for your portfolio for the same reasons.
What is the ITOT ETF’s Strategy?
ITOT seeks to track the S&P Total Market Index, a broad-based market of U.S. equities that gives investors comprehensive exposure to the entire U.S. stock market, “ranging from some of the smallest to largest companies,” according to iShares.
ITOT’s Extensive List of Holdings
While there are many popular S&P 500 (
SPX) funds that simply invest in the S&P 500 Index, which gives investors exposure to 500 of the largest companies listed in the United States, ITOT goes a step further by investing in the much larger S&P Total Market Index.
This makes ITOT an incredibly diversified ETF. The fund holds an incredible 2,758 stocks, and its top 10 holdings make up 26.9% of the fund. For comparison, the popular Vanguard S&P 500 ETF (
NYSEARCA:VOO), one of the stock market’s largest and most popular ETFs, invests in the S&P 500 and owns 504 stocks, with its top 10 holdings accounting for 26.9% of the fund.
Below, you’ll find a comprehensive overview of
ITOT’s top 10 holdings using TipRanks’ holdings tool.
As you can see, ITOT’s top holdings consist of the "
Magnificent Seven" tech stocks like Apple (
NASDAQ:AAPL), Microsoft (
NASDAQ:MSFT), Amazon (
NASDAQ:AMZN), Nvidia (
NASDAQ:NVDA), and Alphabet (
NASDAQ:GOOG) (
NASDAQ:GOOGL), which dominate the top of the S&P 500.
However, at the other end of the spectrum, ITOT also invests in plenty of microcap stocks like Harpoon Therapeutics (
NASDAQ:HARP), Mustang Bio (
NASDAQ:MBIO), and Jaguar Animal Health (
NASDAQ:JAGX) with market caps in the $10 to $20 million range that you won’t find in many other ETFs.
While these
microcap stocks can be risky, they make up such minuscule parts of this massive fund that the downside from any individual one of these names is fairly limited while giving investors some upside if one of them turns into the next big thing.
As you can see, ITOT owns the market's largest and smallest stocks and pretty much everything in between.
Long-Term Track Record
In addition to this excellent diversification and comprehensive exposure to all corners of the U.S. stock market, ITOT has given its investors great returns for a long period of time, which is another important thing to consider when choosing an ETF to invest in.
You can’t really say that ITOT has "beaten the market" -- because ITOT
is the market. That isn’t a bad thing, as investing in broad-market indices has proven to be a successful way to build wealth over time, and very few actively-managed ETFs or strategies manage to "beat the market" over the long run.
What do ITOT’s returns over time look like? As of the end of the most recent month, ITOT has returned 9.3% on a three-year annualized basis. Over the past five years, it has returned 9.0%. Going all the way out to the last 10 years, ITOT has generated an impressive 11.3% annualized return. Finally, since its inception in 2004, the fund has generated an annualized return of 8.9%.
Investing in a vehicle that is producing returns like this is likely to be a winning strategy over time. Think of it this way: an investor who put $10,000 into ITOT 10 years ago would have $19,292 today, nearly doubling their initial investment. If you invested $10,000 into ITOT at its inception in 2004, you would have $43,675 today.
Cost Structure
Another attractive aspect of ITOT is its investor-friendly expense ratio of just 0.03%. This means that if you put $10,000 into ITOT today, you will pay just a barely-noticeable $3 in fees during your first year of investing in the fund. Assuming that the fund returns 5% a year going forward and continues to charge 0.03%, you’ll pay just $39 in fees over the course of a decade.
When you’re just starting out, investing in low-cost funds like this is an important consideration, as it helps you to preserve more of your principal investment over time and saves you from spending large amounts of money on fees, which can really snowball over the years.
For example, let’s say you instead invest $10,000 into an ETF with an expense ratio of 0.35% (which is still reasonable compared to many of the expense ratios you will see out there) -- using the same parameters listed above, you’d pay $443 in fees over the course of 10 years.
Whether you’re a beginner or an experienced investor, it never hurts to own ETFs with low-cost expense ratios.
Is ITOT Stock a Buy, According to Analysts?
Turning to Wall Street, ITOT earns a Moderate Buy consensus rating based on 1,857 Buys, 831 Holds, and 71 Sell ratings assigned in the past three months. The
average ITOT stock price target of $112.72 implies 23.8% upside potential.
A Solid Building Block
Adding it all up, ITOT serves as a robust building block and can be a cornerstone of investors' portfolios. This is due to the comprehensive, diversified exposure it offers to the entire U.S. stock market. Additionally, it boasts a strong track record of long-term performance compiled over many years. Furthermore, its attractively low expense ratio helps investors preserve their investment gains over time.
These features make ITOT an ideal choice for investors who are just getting started. Furthermore, these attributes make it a commendable ETF for investors of all experience levels to consider for long-term inclusion in their portfolios.
Disclosure
Shares of Microsoft (NASDAQ: MSFT) took a step higher as the tech giant benefited from broader tailwinds in the stock market, a bullish analyst note, and the White House's executive order setting ground rules for artificial intelligence (AI).
The NASDAQ 100 After Hours Indicator is down -11.84 to 14,323.67. The total After hours volume is currently 69,826,877 shares traded.The following are the most active stocks for the after hours session: RTX Corporation (RTX) is unchanged at $78.57, with 5,347,188 shares traded.
Wall Street rallied on Monday, kicking off what promises to be a hectic week that includes a heavy earnings docket, economic data and the Federal Reserve's two-day monetary policy meeting.
Wall Street rallied on Monday, kicking off what promises to be a hectic week that includes a heavy earnings docket, economic data and the Federal Reserve's two-day monetary policy meeting.
Apple is expected to unveil at an event on Monday new Mac computers and possibly a new chip to power them as it gears up for a fresh bout of competition against Windows-based PCs with better battery life starting next year, analysts said.
These three major players in artificial intelligence have pulled back from their 2023 highs, and investors looking for long-term growth should seriously consider buying these stocks on the dip.
Wall Street rallied on Monday, surging at the start of what promises to be a hectic week marked with a heavy earnings docket, economic data, and the Federal Reserve's two-day monetary policy meeting and subsequent interest rate decision.
Wall Street's main indexes rose on Monday, boosted by megacap growth stocks ahead of a busy week of earnings and interest rate decisions from major central banks, including the Federal Reserve.
Advanced Micro Devices AMD is expected to report growth in the Client segment, both on a year-over-year and sequential basis, in third-quarter 2023 earnings, set to be released on Oct 31.AMD’s third-quarter top-line growth is expe
The tech-heavy Nasdaq Composite Index entered into correction territory (down 10% from the peak) last week thanks to a steep drop in the big tech stocks. This marks the 70th correction in its 52-year history. The so-called "Magnif
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