Snowflake (NASDAQ:SNOW) stock shocked the world with a ~20% plunge after news broke that its CEO Frank Slootman is to retire, with former Neeva co-founder Sridhar Ramaswamy taking his spot. The handing of the reigns came as the company failed to impress Wall Street, with some pretty tame quarterly numbers along with a side of some soft guidance.
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Undoubtedly, expectations were high, perhaps way too high, going into the quarter. Add some unforeseen uncertainty in a CEO change into the equation, and you’ve got the formula for a 20% single-day decline. Though the sudden CEO shift marked a surprising pivot that likely added more salt in the wounds of an underwhelming quarter, I view the drop as a bit overdone. At its worst, Snowflake stock shed close to 25% of its value before recovering modestly.
In any case, the big drop and sudden retirement of Slootman, who will remain on the company’s board, stands out to me as more of an opportunity than a sign to run for the hills. If anything, I’m even more bullish on the company after its post-CEO-change Snowfall.
Snowflake’s 20% Slide May be Excessive, Given Longer-Term Potential
A forecast downgrade is never welcome, especially when you’re dealing with a stock that surged more than 30% in the three months. The stock was a tad overheated, and expectations were way out of whack. I guess that’s to be expected when you’re a company with a lot of skin in the artificial intelligence (AI) game, especially when you have AI investors who’ve been spoiled by AI chip firms like Nvidia (NASDAQ:NVDA) who’ve continued to defy the laws of gravity.
Indeed, it seems like AI investors have been conditioned for blowout reports, at least lately. And while it’s a tad frustrating to see Snowflake guiding lower rather than hiking guidance on the back of a big beat, I think Snowflake is a firm that still stands to be a big AI winner.
This is especially true under the leadership of its new top boss, Sridhar Ramaswamy, a man who’s been in the AI trenches over at tech titan Alphabet (NASDAQ:GOOGL) and AI-driven search firm Neeva (which Snowflake scooped up last year), well before ChatGPT sparked an AI investment frenzy for the ages.
Snowflake’s New CEO Is the Right Man for the Job
At the end of the day, Snowflake remains an AI-driven company. And, if anything, the company seems to be even more AI-driven with a new top boss who seems to be one of the brightest minds in AI and search. Indeed, it’s always encouraging to have a CEO who has actually had the opportunity to roll up his sleeves with a disruptive startup. Under the leadership of Mr. Ramaswamy, I think Snowflake investors could be in for a surprise as the company looks to enter its next chapter.
Snowflake Cortex is a rich suite of generative AI products that help enrich Snowflake’s data cloud further. Indeed, many of us have had the opportunity to try out large language models (LLMs) like OpenAI’s ChatGPT, Copilot, Anthropic’s Claude, and even Neeva (the first search-focused LLM that shuttered following its acquisition by Snowflake). As more LLMs flood the market, I think we’ll begin to see more “specialized” LLMs designed to tackle more specific applications.
With Neeva and its co-founder, Mr. Ramaswamy, shifting gears from “search for everyday people” to an enterprise-driven search of massive troves of structured and unstructured data, I view Snowflake as one of the more unique plays in the AI waters.
It may be disappointing to some to see Frank Slootman leave as top boss. That said, he’s being succeeded by a man who’s arguably one of the best picks for guiding the company further into the generative AI age.
Is SNOW Stock a Buy, According to Analysts?
On TipRanks, SNOW stock comes in as a Moderate Buy. Out of 33 analyst ratings, there are 24 Buys, eight Holds, and one Sell recommendation. The average SNOW stock price target is $227.29, implying upside potential of 22%. Analyst price targets range from a low of $160.00 per share to a high of $265.00 per share.
The Bottom Line
Expectations were a tad on the high side as Snowflake sailed into its quarter on Wednesday. Undoubtedly, the biggest negative driver of SNOW shares, I believe, was the surprising change at the company’s corner office.
In the meantime, I’m not afraid to admit that I’m one of the few out there who view Ramaswamy’s move to CEO as a potential long-term positive. He is one of the most seasoned AI visionaries out there, after all.
In any case, it will be interesting to see where Snowflake goes from here, with Ramaswamy looking to make his mark as the field of generative AI and the data cloud continues its evolution.
