Investors and experts were expecting more from Snowflake Inc. than just its most recent earnings beat and outlook hike.
Even though Snowflake’s SNOW 0.31% results were better than expected on Wednesday afternoon, the company that makes data software didn’t beat sales by as much as it has in the past. Keith Weiss, an analyst at Morgan Stanley, said that the company beat expectations by about 2%. This is different from the previous quarter, when it beat estimates by 5%.
This is what Weiss thinks: “the path of slowing growth probably doesn’t address existing bear cases around rising competitive intensity.”
On his writing, he said, “Waning optimization headwinds and new product initiatives should support growth, but investors may need more clear signals to get on board.” Weiss rates the stock as equal-weight and sets a price goal of $175 for it.
As of Thursday afternoon, Snowflake shares were down 13.7%, and they’re on track to have their worst single-day percentage drop in about six months.
Mark Moerdler of Bernstein also thought that management could have done more to comfort investors about the company’s direction for growth. “It’s still not clear what to expect from the company,” he wrote, pointing out that Snowflake had earlier this year pulled its fiscal 2029 forecast and had given other “unpredictable guides.”
“It is not clear or well understood what the future growth drivers are,” Moerdler wrote. “Investors need a north star to help them see where the business is going in the long term. Without one, it will be hard for them to trust the company.”
His goal price for the stock has dropped from $185 to $130, and he rates it as “market perform.”
An analyst at Wedbush called attention to the fact that Snowflake’s product income grew by less in the most recent quarter compared to the previous one. “Usually, [quarter-over-quarter] growth in product revenues has been higher in the second quarter than in the first,” he wrote. “This makes me wonder if usage or consumption is slowing down.”
Investors should also think about how cautious the company is about the future. Koujalgi’s research says that Snowflake raised its product-revenue outlook for fiscal 2025 by more than the amount of its most recent beat. However, “the guide is not aggressive.”
He thinks the stock is stable and wants it to go up to $140.
Brad Zelnick of Deutsche Bank is more optimistic about the stock, but he also said that the results were “shy of convincing skeptics.”
Snowflake’s earnings showed that people were buying their new products, which is a good sign. Zelnick says that the company is playing in a strong market that could support many winners.
“The follow through to consumption revenue from newer features and [artificial-intelligence] investments remains the bigger question for investors. For this, more tangible evidence is likely needed to ease their concerns that fast-paced innovation happening up and down the data/AI stack is hurting Snowflake.”
He dropped his goal price from $220 to $180 and kept the buy call.
