Snowflake’s Loss Doubles In 4Q; Shares Drop 3.8%

Shares of Snowflake Inc fell 3.8% in after-hours trading on March 4 as the company’s fourth-quarter loss widened. The cloud-based data company reported a net loss of $198.9 million in 4Q FY21, which more than doubled from the $83.3 million loss incurred during the same quarter last year.

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Snowflake (SNOW) reported a loss per share of $0.7 in 4Q versus a loss of $1.67 per share in the year-ago period. Analysts were expecting a loss of $0.43 per share. Meanwhile, the company posted revenues of $190.5 million, up by 117% year-on-year that topped analysts’ estimates of $178.5 million.

Snowflake’s CEO Frank Slootman said, “We finished our fiscal year with strong performance and reported triple-digit product revenue growth. Remaining performance obligations showed a robust increase year-on-year, reflecting strength in sales across the board. Coupled with this rapid growth, we saw improving operating efficiency while expanding our footprint globally.”

The exponential growth in SNOW’s revenues in 4Q was mainly driven by a 116% year-on-year growth in product revenues to $178.3 million. As of Jan. 31, the company had a net revenue retention rate of 168%. Currently, SNOW has 77 customers with trailing 12-month product revenue exceeding $1 million and 4,139 total customers. (See Snowflake stock analysis on TipRanks)

Snowflake also made two key announcements during the earnings call. The company stated that all shareholders of SNOW’s Class B stock have converted their shares to Class A stock, thus eliminating the dual structure of its common stock effective March 1.

In addition, SNOW announced that after its initial public offering (IPO) in September last year, the IPO lockup restrictions will expire on March 5 and as a result any shares that were not purchased in secondary transactions or in private placement in relation to the IPO “will no longer be subject to a lockup agreement”.

Looking ahead to the first quarter of FY22, SNOW expects product revenues to generate between $195 million to $200 million, translating into growth of between 92% to 96% year-on-year. For FY22, the company forecasted revenues to land between $1,000 million to $1,020 million.

Following the earnings results, Deutsche Bank analyst Patrick Colville raised the price target to $300 from $270 and upgraded the stock from a Hold to a Buy.

Colville said, “We see Snowflake’s growth as suggestive of a very large TAM [total addressable market] and a clear product market fit. RPO [remaining performance obligation] rose 213% in 4Q, and supporting metrics such as logo adds and customers with >$1m product revenue all trended up and to the right, suggestive of continued momentum. We remain bullish on the long-term outlook of Snowflake given positive feedback in our industry checks.”

Colville added, “A further sweetener is that Snowflake announced that it has eliminated its dual class share structure (effective as of March 1st). We see this is a positive as it removes corporate governance concerns, and allows for potential future inclusion in large indices such as the S&P 500.”

The rest of the Street is cautiously optimistic on the stock with a Moderate Buy consensus rating based on 4 Buys and 9 Holds. The average analyst price target of $296 implies almost 19% upside potential to current levels.