Shares of Snowflake are down more than 5% Thursday despite rising in premarket trading on a second quarter expectations beat.
Analysts at Wedbush issued a Neutral rating and $144 price target following the results. The company’s share price fell to $147.56 midday Thursday.
“Snowflake reported product revenues above Street expectation and guide, but the beat was on the lower end of the recent range of beats, and the growth in the quarter seemed a bit light vs. the prior quarter,” analysts wrote.
“The company is seeing stabilization, but still early to call a recovery in consumption trends. However, it reported an uptick in customer sentiment and engagement in July which resulted in healthy bookings.”
The cloud data company posted revenue of $674 million, up 36% year-over-year, and earnings of $0.25 per share, beating analyst projections $662 million and $0.10 respectively.
“SNOW indicated that consumption trends came in-line with expectations,” analysts wrote. “May consumption saw a return to growth with continued strength into June and July. The company said that August consumption patterns have remained strong, but its [third quarter] guidance embeds expectations that large customer consumption growth will remain a headwind”
Snowflake maintained its guidance for fiscal 2024, calling for $2.6 billion in sales for the 12-month period ending January 2024. That’s lower than the $2.76 billion expected on Wall Street.
That’s a bit conservative, Wedbush argued.
“How conservative is this guidance? ...Given that May consumption was off to a slow start and August consumption trends so far are better, it would imply that [the third quarter] for the full quarter has higher growth or more dollars added [quarter-over-quarter],” analysts wrote.
However, [the third quarter] has one fewer day than [the second quarter] and fewer weekdays, so we assume similar $50 million q/q growth in product revenues. This would mean ~$690 million in product revenues, and imply ~$15m beat on the top end of the guide.”
“SNOW should be able to beat its guide by $15 million - $20 million each quarter,” they added.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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