Snowflake vs. Cloudera: Which Cloud Stock is a Better Buy?

Snowflake Inc. (SNOW) and Cloudera, Inc. (CLDR) are two widely known U.S.-based cloud platforms that provide a suite of data analytics and management products. SNOW’s platform enables customers to consolidate data into a single presentation of meaning to support business insights, build data-driven applications, and share data. CLDR’s platform helps organizations to securely store, process, and analyze various data assets.

The digital transformation accelerated by remote working trends amid the COVID-19 induced new normal has made cloud computing services de rigueur among software companies. It is no secret that leading cloud computing vendors such as SNOW and CLDR are pitching enterprises on using their platforms to house data for everything from analytics to personalized experiences. As such, these  two companies appear to be on an exciting growth trajectory because demand for cloud-based solutions is expected to continue growing for the foreseeable future.

In terms of past three-month performance, CLDR is the clear winner with 63.3% gains versus SNOW’s 16.3% returns. But which of these stocks is a better pick now? Let’s find out.

Latest Movements

On January 14, SNOW announced a strategic partnership with Saturn Cloud to usher in the highest-speed tooling for data-science and machine-learning teams. Th e move should help SNOW  commercialize its offerings and deliver Dask to its customers as a compelling alternative to Spark for Machine Learning.

Also in January, the company announced an increase of more than  300% in the total number of data providers on Snowflake Data Marketplace since April 2020. The increase  enables stronger collaboration between data providers and consumers across every industry.

CLDR announced the completion of SOC 2 Type II Service Organization Control certification for Cloudera Data Platform Public Cloud in late January. This certification should enable more customers to rely on its platform as it validates CLDR’s ongoing commitment to data security, governance and privacy.

CLDR also recently announced the appointment of Gary Hu to the company's Board of Directors. His vast experience and management skills should help the company to execute the long-term strategic plan to cement CLDR’s position as the leader in the enterprise data cloud market.

Recent Financial Results

In the third quarter, ended October 31, 2020, SNOW’s total revenue increased 118.6% year-over-year to $159.62 million. The company reported an operating loss of $169.45 million and a net loss of $168.89 million. Its interest income declined 39.1% year-over-year to $1.52 million over this period. However, SNOW now has 3,554 total customers and 65 customers from which it derived  trailing 12-month product revenue greater than $1 million.

CLDR’s total revenue has increased 10% year-over-year to $217.9 million in the third quarter ended October 31, 2020. The company’s subscription revenue was $197.4 million, representing  an increase of 18% versus  the third quarter of fiscal 2020, while its annualized recurring revenue grew 12% year-over-year. Its Gross profit increased 25% from the year-ago value to $175.85 million over this period.

Expected Financial Performance

Analysts expect SNOW’s revenue to increase 89.3% next year. The company’s EPS is expected to grow 6.5% in 2022.

In comparison,  analysts expect CLDR’s revenue to increase 9.7% next year. The company’s EPS is expected to grow 17.1% in 2022.

Profitability      

CLDR’s trailing-12-month revenue is 1.8 times SNOW’s. Moreover, CLDR is more profitable with a gross profit margin of 76.3% versus CLDR’s 60.3%.

Valuation

In terms of trailing-12-month price/sales, SNOW is currently trading at 51.81x, which is much more expensive than CLDR, which is currently trading at 6x. Also, its trailing-12-month Price-to-Book of 17.44x is 372.6% higher than CLDR’s 3.69x.

CLDR looks much more affordable compared to SNOW.

POWR Ratings

SNOW has an overall rating of F, which equates to a Strong Sell in our proprietary POWR Ratings system. However, CLDR has an overall rating of B, which represents a Buy. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

CLDR has a Growth Grade of B, which is consistent with its  expected growth in earnings and revenues. In comparison, SNOW has a Growth Grade of C.

Both SNOW and CLDR have a grade of B for Momentum, which is consistent with their price returns over the past months.

In terms of Value Grade, SNOW has a D, consistent with its higher-than-industry average price/sales ratio. CLDR’s Value Grade of B is reflective of its lower-than-industry average price-to-book ratio.

While SNOW is ranked #80 of 81 stocks in the Technology – Services industry, CLDR is ranked #16 in the 60-stock Software – Business industry.

Beyond what I stated above, our POWR Ratings system also rates both SNOW and CLDR for Quality, Stability, and Sentiment. Get all of SNOW’s ratings here. Also, click here to see the additional POWR Ratings for CLDR.

The Winner

Even though SNOW’s IPO grabbed much  attention last year, its lofty valuation and weaker financials make it a riskier investment compared to CLDR. Given CLDR’s much lower relative valuation and superior earnings and revenue outlook, the stock seems to have solid upside potential. Our research shows that the odds of success increase if one bets  on stocks with an Overall POWR Rating of Buy or Strong Buy.

If you are looking for better stocks in the Technology - Services industry, click here. Also, click here if you want to know about other top-rated stocks in the Software - Business industry.

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CLDR shares were trading at $17.48 per share on Monday afternoon, up $0.37 (+2.16%). Year-to-date, CLDR has gained 25.66%, versus a 4.11% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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