Weekly Earnings Review: November 27, 2023- December 1, 2023

    Stocks continue to rise as we enter the final month of trading for the year. The S&P 500 and Nasdaq had another stellar month. Bond yields continue to fall, as interest rates have seemed to reach their peak. Estimates are all over the place when it comes to when cutting will start and how many cuts we will see next year. I added a new mantra to particular companies. I want to add some visual pieces to the post to entice the readers. Hope you guys enjoy the visuals and the excerpts. Stay investing!

Monday, November 27, 2023

Zscaler (ZS)- 

    Zscaler continues to carry its momentum, as the company beat on both the top and bottom lines. The company achieved 40% growth on the top line and saw impressive growth on the bottom line as well. Management raised guidance and are expecting around 30% growth on both the top and bottom line. What is so impressive about this company is that they are achieving high growth and high profitability. This is a feat that a lot of software companies continually try to achieve, but usually have to risk one for the other. Zscaler currently has $2B in Annual Recurring Revenue and is growing that figure continuously. Some key figures from the financial statements include Cash flow from operations of $261 million, a 103% increase from the prior year. The customers also saw significant growth and the dollar based retention rate sits at 120%. Another major improvement was the operating margin that saw a 622 basis points increase. Overall, the quarter was great and the company continues to accelerate in a flaming hot Cybersecurity sector.

One Visual:

Source: Zscaler Q1 24 Call Presentation

    I pulled this visual from slide 4 of Zscaler's call presentation. The SaaS companies strive to satisfy the Rule of 40. This calls for the company to achieve a sum of 40% deriving from Revenue Growth and Free Cash Flow Margin. We can see that Zscaler more than doubled this metric thanks to the growth in operating cash flows and also a credit to the impressive revenue growth. I am intrigued to see how ths free cash is deployed. I personally think that the company will continue to reinvest in itself a little longer before they start returning to shareholders. The total addressable market is so larger for the Cybersecurity space, and I think if Zscaler continues to operate effectively, they will gain a decent chunk of this market share. 

Tuesday, November 28, 2023

Crowdstrike (CRWD)-

    Crowdstrike beat earnings on both the top and bottom line. The company also raised guidance for the next quarter as well. Revenue saw a solid 35% increase, and the Adjusted EPS metric grew by 105%. Management commented on the tough macro conditions and the geopolitical tensions, but they were able to perform at record levels in Q3. The company was profitable for the third quarter in a row. The Cash Flow statement had a lot of wins with cash from operations of $247M and free cash flow of $239M. The Annual Recurring Revenue came in at $3.15B, which is a 35% increase. One of the advantages the companies has is the multitude of products and services they offer. The company reported that 63% of their customers subscribe to 5+ modules. This is the start of a competitive advantage because the switching costs are going to be so high. I really commend the management fro doing these things. I am really satisfied with this company and am really impressed with the results this quarter. I expect Crowdstrike to continue to grow its market share in the Cybersecurity space.

Wednesday, November 29, 2023

Snowflake (SNOW)- 

    Snowflake beat earnings on both the top and bottom line. The company is seeing a nice growth value on the top line. Snowflake was profitable on a Non-GAAP basis and maintained its guidance. Management stated that the results reflect the strong execution in a broadly stabilizing macro environment. The company saw growth of 52% in cash from operations. The customer growth was also very impressive with an overall increase of 24%. From a valuation standpoint, this company seems to be more expensive. This makes a lot of sense due to the recent run on the stock price. The stock has outperformed the S&P 500 and is currently up nearly 38% this year. Overall, there is a lot to like from this company this quarter. I do think it is a little expensive, but I think it can maintain the high growth metrics and continually to improve profitability. I would like to see the company reach profitability on a GAAP basis in the next couple of quarters. I also love the sign that the company is picking up more contracts, but this leaves a lot of RPOs left to fulfill.

One Visual:

Source: Snowflake's Q3 Earnings Presentation

    I pulled this visual from slide 21 of Snowflake's Earnings Presentation. I wanted to point out some things about this metric. The company saw a 3,100 basis point decrease since the prior year. A lot of people see this as a bad sign. However, if we want to look at the brightside of things, the net revenue retention rate still sits at 135%. Sure, it's not the 166% that was achieved last year, but customers are still spending 35% more. When we drill down on these technology companies, a lot of them charge based on the usage of their product. With a tough economic environment swarming businesses, a lot of companies opted to cut costs and wind down usage of these products. The fall in net revenue retention rate has been a common trend among a lot of technology companies. I am still impressed that Snowflake is able to perform this well in tough macro conditions. 

Thank you for reading!

Disclaimer: This is not advice to buy or sell stocks based on my recommendations, this advice is very opinionated and interpretive of facts presented in earnings.