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Snowflake (NYSE:SNOW) shares are down about 5% in pre-open Thursday after the data software company offered a softer-than-expected outlook.
Snowflake posted an EPS of $0.11 on revenue of $557 million, beating the average analyst consensus of earnings of $0.04 on revenue of $539.07M. Revenue increased 67% year-over-year (YoY) while the net revenue retention rate came in at 165%, down from 173% YoY.
“We continue to drive strong growth at scale, coupled with strength in unit economics, operating profit, and free cash flow,” said Frank Slootman, Chairman and CEO of Snowflake.
For this quarter, the company said it sees product revenue in the range of $535-540M, missing the $551.8M consensus and causing shares to drop. For FY2023, Snowflake sees product revenue at $1.92B, in line with estimates. The company did raise its full-year adjusted operating margin outlook to 3% from the prior 2%.
Morgan Stanley analysts cut the price target to $225 per share from the previous $248 to reflect below-consensus Q4 guidance.
“Strong customer adds, rapidly improving FCF margins and de-risked FY24 outlook keep us OW on a story that is likely one of the first to re-accelerate coming out of the downturn,” the analysts said in a note.
Raymond James analysts also cut the price target – to $180 from $197 per share. Still, they remain upbeat on Snowflake stock due to the reasons outlined below.
“Despite the revised guidance driven by macro headwinds, the stock’s pullback over the last several months implies that investors had anticipated slowing consumption. In a normalized environment, we believe Snowflake’s modest share, strong competitive position, and secular tailwinds from cloud adoption provide a compelling fundamental growth story for investors who can tolerate the volatility,” the analysts wrote.
