Snowflake (NYSE:SNOW)
After the data warehouse management business, Snowflake (NYSE:SNOW) cut its projection for the balance of the fiscal year on Thursday, Snowflake stock dropped more than 13% in pre-market trading as investors and analysts worried about the company’s future.
According to Wedbush Securities analyst Taz Koujalgi, who has a neutral rating and a $144 price target on Snowflake stock, this is the second consecutive projection drop for the firm, as the latter indicated that consumption growth has slowed down, in part due to older customers optimizing their use.
Regarding the new guide, “one of the key questions that investors will be asking is if the new guide is ‘de-risked’ enough,” Koujalgi said in a message to potential backers.
As a consequence of the results, Blair Abernethy of Rosenblatt Securities downgraded Snowflake to neutral, citing the company’s “disappointing outlook” and “lack of visibility.”
Snowflake has lowered its product sales forecast from $2.71 billion to $2.6 billion for the entire year. Full-year product sales were predicted by analysts to be $2.71B.
The business also reduced its outlook for the full year’s adjusted operating margin from 6% to 5%.
Snowflake predicts that its product sales for the next quarter will increase by 33% to 34% year over year, to a range of $620M to $625M, below the $646.3M analysts were anticipating.
The business, which is run by Frank Slootman, anticipates an adjusted operating margin of around 2%.
Since the “optimization headwinds” are temporary, TD Cowen analyst J. Derrick Wood reduced his share price objective from $205 to $185 while maintaining the firm’s outperform rating.
According to a message to investors, “visibility is clearly low, and we expect shares to remain range-bound post the reset” Wood. Ultimately, “new solutions around Snowpark, Streamlit, Applica, and now Neeva” will be the key growth drivers in the next year.
On Wednesday, Snowflake confirmed rumors by announcing the acquisition of search company Neeva.
Mark Murphy, an analyst at J.P. Morgan, said that despite “good” first-quarter earnings, there are indications of strain in the company, leading him to cut his price target for Snowflake shares from $165 to $155.
As the macro waves stretch out over a wider surface area, “high-growth software has clearly begun to feel the stress of the broader macro/demand environment,” Murphy said in an investor letter.
The combination of Snowflake’s outstanding growth profile and blooming cash flow dynamic shows the virtues of Snowflake’s business model, in our opinion, “longer term and through the course of an economic cycle,” Murphy said.
Wall Street analysts had a consensus Buy rating for Snowflake before the company announced quarterly earnings and forecast. The average predictive performance of Wall Street analyst ratings is far lower.
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