Snowflake (SNOW) stock was having a bit of a meltdown in Thursday’s session. The data warehousing leader delivered an excellent Q4 report, but that was not enough for investors as the company’s outlook suggests its growth rate might be slowing down somewhat.
In F4Q22, revenue increased by 101.6% year-over-year to $383.77 million, beating the Street’s call by $10.9 million. That includes Product revenue of $359.6 million, which rose by 102% and came in above the company’s $345 million to $350 million guided range. EPS of -$0.43 also beat the consensus estimate – by $0.12.
There were other impressive metrics. The company delivered a net revenue retention rate of 178%, while remaining performance obligations (RPOs) hit $2.6 billion, a 99% year-over-year tick and revving up from the 94% growth in the prior quarter.
However, for the April quarter, the company expects product revenue to be in the $383 million to $388 million range, amounting to between 79% and 81% growth compared to the same period last year. While this is a bit higher than the Street’s $382 million estimate, it indicates the growth is not so huge anymore. And considering SNOW shares’ mighty valuation, any blemishes, however small, are considered a letdown.
Nevertheless, looking at the performance and reaction, Canaccord’s David Hynes is surprised by the selloff, writing: “Snowflake delivered all of these impressive growth metrics while generating 12% positive FCF margins for the year. You simply can’t find this type of profitable growth anywhere else in software.”
“But then again,” the 5-star analyst went on to say, “We’re in a tape where anything less than pristine, especially for high valuation stocks, is met with pretty aggressive selling.”
Since SNOW’s September 2020 IPO, the valuation has always been a sticking point for some, and though Hynes concedes the selloff could be a “good buying opportunity,” the analyst is “still a bit wary of pushing folks into high-valuation software names in this tape.”
As such, Hynes sticks to a Hold rating, and even lowers the price target from $360 all the way down to $210, indicating shares have 6% downside from current levels. (To watch Hynes’ track record, click here)
Others on Wall Street are generally more optimistic; the stock has a Moderate Buy consensus rating, based on 13 Buys vs. 4 Holds, while the $334.61 average price target suggests shares will see growth of ~40% in the year ahead. (See SNOW stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
