The stock market is an unforgiving beast at times. Looking at the headline numbers generated by Snowflake (NYSE:SNOW) in its latest quarterly update, you would think they represented a solid quarter for the data warehousing giant. Yet, the shares sank by 18% in the subsequent session. So, what caused the big drop?
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In its fiscal fourth quarter (January quarter), boosted by improving consumption metrics albeit somewhat offset by holiday seasonality, revenue climbed by 31.5% year-over-year to $774.6 million, beating the Street’s forecast by $14.38 million. Product revenue accounted for $738.1 million of the total haul, posting y/y growth of 33%.
Other solid metrics included a net revenue retention rate of 131%, while RPO (remaining performance obligations) impressed, reaching $5.2 billion, amounting to a 41% improvement compared to the same period a year ago. The bottom-line figure also came in strong, as adj. EPS of $0.35 beat the analysts’ expectations by $0.17.
However, that was not good enough for investors who appeared to focus heavily on two developments. Hardly ever an investor-pleasing move, the company announced a surprising shakeup in the C-suite with CEO Frank Slootman set to retire immediately. His position will be taken by Sridhar Ramaswamy, who joined the firm last year and had been operating as senior vice president of AI. Moreover, the outlook for F2025 was a disappointing affair with the company eyeing product growth of 22%, some distance below the 30% anticipated on Wall Street and the 33% notched during F2024.
So, what’s an investor to do now? Take advantage of the dip, is Piper Sandler Brent Bracelin’s advice.
“The ~20% sell-off in SNOW shares has created an attractive entry point, in our view, to own a marquee AI data platform with a high-margin $3B+ revenue run-rate model that could more than 3x to $10B within five years,” the analyst said. “While the CEO transition and material F2025 growth reset to 22% was unexpected and heightens near-term execution risk, we see several upside levers in the 2H tied to new products that could re-accelerate consumption with the addition of new AI workloads,” Bracelin opined.
Accordingly, Bracelin rates SNOW shares an Overweight (i.e., Buy), although his price target is lowered from $250 to $240. Nevertheless, there’s still upside of 42% from current levels. (To watch Bracelin’s track record, click here)
This sentiment is echoed by the majority of analysts. SNOW stock maintains a Moderate Buy consensus rating, backed by a blend of 24 Buys, 9 Holds, and 2 Sells. The average target sits at $212.23, indicating a one-year growth of ~26%. (See Snowflake stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
