Snowflake Investors 'Further Confused' After Q2 Earnings: One Analyst Says They Know Why

Shares of Snowflake Inc SNOW tanked in early trading on Thursday, after the company reported weak quarterly sales.

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

JPMorgan On Snowflake

Analyst Mark Murphy reiterated an Overweight rating, while slashing the price target from $185 to $175.

Snowflake's second-quarter results "show a softer beat vs. guide relative to Q1, Murphy said in a note. He added that the guidance for fiscal 2025, although raised, continues to imply a deceleration in the back half of the year. 

The "key silver linings" in Snowflake's results include solid bookings, driven by accelerating RPO growth "with the closure of two nine-figure deals in Q2, alongside some ongoing subtle stabilization in DBNR (dollar-based net retention) trends," the analyst wrote. The pace of sequential DBNR contraction moderated for the fourth consecutive quarter, he further stated.

Check out other analyst stock ratings.

Needham On Snowflake

Analyst Mike Cikos reiterated a Buy rating, while reducing the price target from $210 to $160.

Snowflake's product revenue of $829.3 million represents 30% year-on-year growth, coming in higher than the consensus of $813.7 million, Cikos said. Gross and operating margins were also higher, he added.

While, Snowflake exceeded its guidance and sell-side expectations for the July quarter, its shares declined as investors had expected stronger revenue growth for the October quarter and an increase in operating margin guidance, the analyst noted.

“We believe investors are further confused by management’s decision to raise FY25 Revenue guidance off the current quarter’s 2% beat versus guidance while not raising guidance last quarter on the stronger 5% beat,” Cikos said.

Although net revenue retention continued to decline to 127%, from 128% in the prior quarter and 142% in the year-ago period, RPOs accelerated for the third consecutive quarter and total customer count increased, the analyst stated. Snowflake raised the midpoint of its product revenue guidance for the full year by $56 million, while maintaining its profitability outlook, the analyst added.

Goldman Sachs On Snowflake

Analyst Kash Rangan reaffirmed a Buy rating and price target of $220.

Snowflake reported solid quarterly results, but its guidance fell short of high expectations, Rangan said. The stock came under pressure due to the "lack of beat flow-through" on operating and free cash flow margins and a "growing dispersion between cRPO / RPO and forward revenue growth," he added.

"Snowflake's true beat-and-raise in a still constrained spending environment underscores the stability of consumption and optimization trends through mid-August," the analyst wrote. The company's NNR "displayed the lowest rate of sequential deceleration in the past 2+ years," he further stated.

SNOW Price Action: Shares of Snowflake were down 13.5% to $116.71 at the time of publication on Thursday.

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