What SNOW Needs to Not Fall: Strong Revenue Growth & AI Durability

smarter with Schwab. We're back on Morning Trade Live looking at the one year chart for snowflake. It's been a very strong year for the software company as shares are up almost 40% year over year. You can see that climb and particularly getting a boost from the Q1 earnings. Let's see if we see the momentum today. And we're going inside out now on this company to preview the print tonight. Joining us now is Jack Mccrosky who's Jackson Square Capital. Hey Jack, thanks so much for joining us. Given the run we've seen, I mean, up nearly 40% year to date. And given what we heard in the first quarter, I mean, it just feels like the expectations are exceptionally high for this one. No room for error. What are you watching. Yeah. Thanks for having me, Sam. We do think that expectations are going to be quite high, but we're expecting another great quarter for product revenue to continue accelerating. That being said, I think if you look at Mongodb's print last night, it's a great example of expensive software beating and raising, but still finding its way down. Double digits are interesting because I was actually covering those numbers, and it felt like it wasn't about the beat and raise that wasn't in question. It's more about the elevated investor sentiment that was going into the print, which is why we've obviously seen a reaction like that. Do you suspect we're likely to hear from the same or see the same reaction to snowflake, regardless of what they say, you know, given the magnitude of what the beat and raise could potentially be tonight. Right. So the stock's doubled in about four months. So you know they are pricing for about perfection here. What what investors are going to want to hear is incremental information about cortex code. Because that's going to be the big driver of revenue in the second half. And if the company can guide second half revenue to Reaccelerate. Okay. What else are you looking out for as far as the important metrics to really zero in on tonight and the language on the call, what would you like them to say? Well, you know, they guided to just 30% product revenue growth this quarter, besides probably at about 35%. But 35 I don't think is going to cut it. It's going to need to be higher than that. And then the next quarter, Q3 is actually has quite difficult comps. So Q4 is the one that I think a lot of people have their eye on, and that's going to be needing to be closer to 40% for product revenue growth ultimately, is the AI products that they're that they're building, leading to higher revenue. Okay. That's obviously something that to be keyed in on tonight. You know, given what we've seen in software this year, big sell off at the start of the year, investors seemingly have been wrapping their arms a lot more around the sector of late. We've very much seen the recovery. I think that's been helped by the earnings. I mean does this does this factor in are you sort of picking the winners and the losers in this space right now. Is that kind of the aim of the game? Yeah, I think we would categorize this as moving from the training phase to the inference phase of the economy. So when you started out with AI in the training phase, really the only winners that you were seeing was the semiconductors, memory, networking equipment, optical guys. And I still think those guys are very investable and, you know, you should be in them for the inference phase as well. But I think the opportunity set of winners actually expands when we move to this inference phase, where we have AI agents running in the background of workflows. And that's where some of these software companies that were so beat up for so long can start to shine. Snowflake being a great example. Yeah. And what have we taken away just very quickly from you mentioned MongoDB, but from some of the other companies that have already reported in the software space, that might give us some clues about what snow is likely to say from a demand standpoint, right? Yeah, I think we look at Cloudflare, that's a company that we've covered, and they've seen that AI agent usage has has up 50% quarter over quarter. They have just net users on the, on the profile doubling last year or excuse me, this year over last year. So it does seem like this is really growing. And, you know, I think that it's a positive read through for snowflake as well. Okay. That's good to know. Good setup for tonight. Snowflake under some pressure going into this print. But yeah shares in MongoDB. Ouch. Down 10%. Let's watch this space. Jack thanks so much for the preview. Really useful. Jack McCloskey there from Jackson Square Capital. Let's trade this name now with Tom white, host of Fast Market. Good morning Tom. Just give us an example. Trade ahead of this print later. Yeah. Expectations in the bar. Really high on this one Sam. Going into the report we've seen some pretty good numbers out of other software companies. But this one's outperform to the upside. So yeah hitting those numbers beating on guidance, maybe giving a good overview of EPS revenue moving forward might not be enough. So you can still take a directional bias using the option market. This is a high priced stock about $316. You got to take that into consideration when looking at, you know, potential trades going into this. So I looked at something short term where I can still take that directional bias, but I don't have to be aggressive on it. I can give myself better probabilities of success using the leverage and the option market. The option market is pricing in about a plus or -11% move in either direction, about $36 in either direction on a one day basis. So I use that as the barometer for my short neutral to bullish put vertical. Here. I went out to the September 4th weekly options that expire in two days, sold the out of the money 280 strike put and then against it bought the 270 strike put. So a short $10 wide neutral to bullish put vertical. You're collecting roughly about a $2.30 credit. That's what you can make on this trade $230 per spread with about $770 in risk. The key here is it takes your break even, where you start to lose money all the way down to two, 7770 to the downside. That's over 12.5% below the current share price. So you're outside of that one standard deviation range that the option market's pricing in. On this one, you've got a lot of risk, $770 in risk to only make $230. Right. But at the same time, the probability that that short 280 strike will be out of the money at expiration, which is what you want on this type of trade, right? You want the stock to remain above 280. You sell it for 230. It goes out at zero at expiration on Friday. The probability of that 280 strike that you sold in this short put vertical will be out of the money. At expiration. It's about 78% probability that it'll be above 280 into expiration at Friday's close. So those trade offs that we always talk about where yeah, I'm risking a lot more than what I could potentially make. But this is a passively bullish trade where the stock goes higher consolidates here or even goes lower. You're wrong. Stock goes lower but remains above two $277.70. You're still going to be profitable on this type of trade. So after this massive run up maybe want to give yourself the benefit of the doubt here with this short neutral to bullish put vertical here in snowflake and taking advantage of that higher implied volatility levels going into the report. Yeah. I mean this had a phenomenal response last time around. Let's see if they can keep up the momentum. But obviously we're seeing some software softness going into this print today. MongoDB as I mentioned down 10%. Really appreciate it. Tom, thanks so much for a preview of snow and an example trade. We have se