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BTIG’s downgrades Snowflake (NYSE:SNOW) to a “Neutral” rating from “Buy” and removes his price target on stock (previously $158), citing down-ticking “field checks” and “potential for product revenue growth to slow in coming quarters.”
In what the analyst labels “a tough call, because the long-term growth opportunity ahead of SNOW remains very compelling,” he nonetheless lowers his expectations on the cloud-computing firm on the heels of several negative macro trends:
1. “Sequential trends at the hyperscale cloud IaaS providers decelerated in Q2, which we think is a negative read-through to SNOW.”
2. Checks show company’s clients are increasingly concerned over the economic downturn: “(customers) spending intentions with SNOW remained solid, but feedback was not nearly as good as 6 – 12 months ago as customers are becoming increasingly concerned about a weakening economic environment.”
3. Analyst cites conversation with “two large customers who are looking to shift some consumption from SNOW to Databricks (private) to help contain rising SNOW costs.”
Adding to the last point, BTIG notes that “this is likely an early-stage trend,” but one that may grow into a considerable risk factor.
Overall, the analyst sees the above as a “notable” shift in macro environment “relative to 6 –12 months ago,” and urges to be “more cautious on the name.”
Shares of SNOW are trading nearly 5% lower in pre-market, adding to an over 54% loss YTD. This compares to just 14% YTD loss for the S&P 500 index.
