Snowflake Inc (NYSE: SNOW) shares are trading lower after the company reported fourth-quarter financial results, issued guidance and announced a CEO transition on Wednesday. Morgan Stanley downgraded the stock from overweight to equal weight following the report.
Oppenheimer analyst Ittai Kidron maintained Snowflake with Outperform and lowered the price target from $240 to $220.
The analyst said Snowflake delivered a strong quarter, beating consensus estimates for revenue and EPS, benefiting from high TNR, new customer additions and traction from large customers. Yet the FY2025 product revenue guide was well below expectations and they replaced the CEO.
The analyst is optimistic, believing that the outlook deficit is due to very conservative guidance assumptions and contrary to recent consumer trends aimed at minimizing future revisions and setting a more accessible bar for a new CEO.
The analyst noted that this allows Snowflake to deliver year-round performance and grow revenue closer to recent cRPO trends. Innovations around AI and the availability of additional services can provide additional impetus. Kidron forecast first-quarter revenue and EPS of $784.3 million (previously $796.8 million) and $0.12 (previously $0.19).
Canaccord Genuité analyst Kingsley Crane reiterated the Buy rating with an unchanged price target of $230.
Snowflake shares point to about 20% decline in after-hours trading as the company provided initial fiscal 2025 product revenue guidance of 22% year-over-year growth, downplayed its external target of $10 billion in product revenue for fiscal 2029 and announced that CEO Frank Slootman would step down. with current Senior Vice President, AI Sridhar Ramaswamy taking over the role.
Crane noted several factors that indicate the company is and will be performing better than at first glance. It reported record RPO growth, including cRPO growth of 28.5%, net retention of 131%, the lowest decline in the last six quarters, with eight of Snowflake’s top ten customers increasing revenue by sequential manner and a new guiding philosophy introducing more caution into the model than in previous years.
Crane forecast first-quarter revenue and EPS of $786.3 million and $0.15.
Mizuho analyst Gregg Moskowitz reiterated a buy and lowered the price target from $255 to $205.
While product revenue growth of 33% year over year exceeded the Street’s 30% target, Moskowitz said many were hoping for further upside. Net new product revenue was lower than Q4 2022, although it was balanced by encouraging bookings feedback and a strong re-acceleration in cRPO/RPO bookings growth.
That said, stocks will come under significant pressure today as investors digest the resignation of CEO Frank Slootman and a depleted fiscal 2025 product revenue guide of just 22% year-over-year, he said. he noted. Nevertheless, the forecasts seem conservative, leaving room for multiple vectors of increase.
Moskowitz forecasts first-quarter revenue and EPS of $785 million (previously $799 million) and $0.25.
Truist Tracks The analyst maintained a Buy and lowered the price target from $250 to $210.
Although disappointed with the financial outlook, the analyst noted several factors in the story that make investors constructive at current levels. The valuation implied by after-hours trading and updated estimates indicate that the shares have returned to the orbit of the group’s other high-flying stocks.
The analyst noted that the management team was particularly conservative in its outlook. The analyst forecasts Q1 revenue and EPS of $786.3 million (previously $797 million) and $0.12.
Piper Sandler analyst Brent Bracelin maintained an overweight rating and lowered the price target from $250 to $240.
The sale of approximately 20% of Snowflake’s stock created an attractive entry point to own a renowned AI data platform with a high-margin revenue rate model of over $3 billion that could grow more than 3-fold to $10 billion within five years, the analyst said. .
While the CEO transition and reset of significant FY2025 growth to 22% was unexpected and increased near-term execution risk, the analyst noted several upside levers in the second half related to new products that could reaccelerate consumption with the addition of new AI workloads. .
While the valuation remains at a premium of ~15x EV/S and ~48x EV/FCF over calendar year 2025 post-delisting, this is the lower end of three-year historical levels, Bracelin noted .
However, the analyst said AI-enhanced long-term growth prospects, a proven operating model with FCF margins of over 28%, and strong leadership warrant a premium. Bracelin forecast first-quarter revenue and EPS of $785.3 million and $0.19.
Needham analyst Mike Cikos maintained a buy and lowered the price target from $265 to $240.
Snowflake’s fiscal 2025 product revenue forecast of 22% surprised compared to sales-side forecasts of 29% annual growth, Cikos said. He noted that the forecast was very conservative in that it assumes no contribution from new products or any revenue benefit from the Iceberg Tables launch.
The basic guidance is a kitchen sink since it considers the entire fiscal year 2024, despite last year’s status as a tale of two halves, where consumer trends have improved significantly over the past few years. stages of the year, he said.
Although Snowflake wants to remove any doubt about possible forecast reductions, the 22% starting point seems draconian, according to the analyst. Additionally, he noted that the guide provided ample room for outperformance under the leadership of new CEO Sridhar Ramaswamy.
Cikos forecast first-quarter revenue and EPS of $784.6 million and $0.26 (previously $0.18).
Spear Alpha ETF (NASDAQ: SPRX) has over 9% exposure to Snowflake and has gained over 13% year to date.
Price action: SNOW shares were down 20.1% at $184.00 at last check Thursday.
Photo: Courtesy of Snowflake
