Snowflake Posts Wider-Than-Expected 3Q Loss; Shares Slip 4%

Shares of Snowflake dropped 3.7% in Wednesday’s extended trading as the cloud-based data-warehousing company reported on a wider-than-expected loss in the third quarter.

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The company posted a 3Q loss per share of $1.01, while analysts were expecting a loss of $0.27. However, the quarterly loss narrowed from the year-ago’s loss of $1.92 per share.

Meanwhile, Snowflake’s (SNOW) top-line jumped 119% to $159.6 million year-over-year and surpassed analysts’ expectations of $146.9 million, reflecting strong demand for its cloud-based data storage and analytics services.

Snowflake’s CEO Frank Slootman said during the conference call that “We saw strong consumption trends across our customer base in Q3 with product revenue growing 115% year-on-year to $148 million and a net revenue retention rate of 162%.” He further added, “Our growth is driven by long-term secular trends in data science and analytics enabled by cloud scale computing.” (See SNOW stock analysis on TipRanks)

For 4Q, the company projects product revenues in the range of $162-$167 million, which at the mid-point is lower than the Street’s estimates of $166 million. For fiscal 2021, it expects sales to generate between $538 million and $543 million.

On Nov. 30, Cowen & Co. analyst Derrick Wood reiterated a Buy rating and the price target of $295 (0.8% upside potential) on the stock. In a note to investors, Wood wrote, “While we expect the stock to remain volatile, we remain confident in the momentum of growth fundamentals and believe that the press and market awareness resulting from its highly successful IPO (initial public offering) (the largest ever software IPO) is acting as an incremental catalyst to drive up growth in new customer activity, partner ecosystem activity and deal sizes.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys, 11 Holds and 2 Sells. The average price target stands at $266.67 and implies downside potential of about 8.9% to current levels. Shares have gained 15.3% since its listing on the stock exchange on Sep. 16.