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Snowflake price targets lowered on ‘conservative’ sales guidance

The cloud computing software firm received price target downgrades from several analysts, after the release of its Q1 results.

Source: Bloomberg
  • Snowflake Inc. (NYSE: SNOW) share price fell 5% the day after it revealed that net losses more than doubled in Q1
  • Nevertheless, CEO Frank Slootman called the results ‘strong’, with revenue surging 110%
  • The company also forecasted for Q2 product revenue to grow between 88% and 92%
  • One analyst believes the guidance is ‘conservative’ as he lowered his price target
  • Buy and sell Snowflake stocks with an IG account

Snowflake posts mixed results in Q1

Snowflake’s stock price target has been lowered by several Wall Street analysts, after its losses more than doubled for its latest reporting quarter from a year ago.

The cloud computing software firm posted a net loss of US$203.2 million, or US$0.70 a share, for the first quarter of fiscal 2022, up from US$93.6 million in the first quarter of fiscal 2021.

This exceeded analysts’ earlier estimates for a net loss of US$0.51 a share.

Snowflake shares fell 5% within the first sixty minutes of trading when markets reopened the next day.

Nevertheless, the company recorded what CEO Frank Slootman called ‘strong’ results, with revenue burgeoning 110% year-on-year to US$228.9 million for the quarter.

In terms of outlook, Snowflake forecasted that second-quarter product revenue will grow between 88% and 92% to between US$235 million and US$240 million.

Why are analysts bearish on SNOW?

Canaccord analyst David Hynes lowered his firm’s price target on the stock to US$240 from US$275 while keeping a ‘hold’ rating.

His price target is predicated on the belief that some of the current bullishness on the stock first needs to taper off before the risk/reward starts becoming more favourable.

Deutsche Bank’s Patrick Colville also cut his price target to US$248 from US$300 alongside a ‘buy’ call, citing Snowflake’s ‘conservative’ product growth guidance.

Similarly, Loop Capital analyst Yun Kim slashed his price target to US$250 from US$270 while maintaining a ‘hold’ rating,

Although the company reported another strong quarter with all metrics showing continued ‘strong momentum’, much of the current sales momentum and potential market opportunity around cloud data platform and cloud data lake are already priced into the stock’s price, with it trading at 58 and 38 times of 2021 and 2022 sales projections, Kim said.

Bucking the price downgrade trend was Evercore ISI analyst Kirk Materne, who reiterated a US$311 target and ‘outperform’ rating.

Materne wrote that while Snowflake’s share price could ‘remain range-bound in the near-term’ as the stock continues to grow into its valuation, the risk/reward for long-term investors remains ‘skewed to the upside’ given that it is ‘one of the most unique hyper-growth stories in software’.

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