The stock market is sometimes not easy to please. Stocks are often penalized for not delivering on all points when announcing results, even if the numbers were promising.
This brings us to Snowflake (NYSE:SNOW)whose shares fell nearly 15% last Thursday, even though the company beat expectations on several key metrics in its Q2 report. Revenue rose 28.9% to $868.82 million, beating the consensus estimate by $18.67 million, while adjusted earnings per share of $0.18 beat expectations by $0.02.
Looking ahead, Snowflake forecasts third-quarter product revenue to be between $850 million and $855 million, slightly above the $851 million analysts had expected.
Overall, things are looking pretty good. However, the share price drop can be attributed to several factors. While the revenue forecast exceeded expectations, it may not have met investors’ high expectations. In addition, revenues reached $779 million, below the $831.9 million forecast by analysts. Net loss widened to $317.77 million, compared to $227.32 million in the year-ago quarter. Although the revenue retention rate remains robust at 127%, the trend is heading in the wrong direction.
Nevertheless, Canaccord analyst Kingsley Crane points out that the report has several positive aspects and believes that the recent decline in the share price represents a buying opportunity for investors.
“Overall,” Crane said, “FCF margins remain strong at 26% and we expect the market to place more weight on SNOW’s growth prospects in valuation. In that regard, Q2 was a step in the right direction. ~30% cRPO growth over the last two quarters suggests that a 25% product revenue growth forecast for FY2025 is more than reasonable. We continue to see these trading ranges as a buying opportunity for a company that is well positioned to capitalize on an ongoing customer investment cycle in data management.”
For this reason, Crane rates SNOW stock as a Buy, while his $190 price target implies an upside potential of about 64% from current levels. (To watch Crane’s track record, click here)
Elsewhere on the Street, the stock receives another 21 buy ratings and 9 hold ratings, for a consensus rating of Moderate Buy. The average target is $176.39, suggesting shares will gain 52% in the coming year. (See Snowflake Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important that you conduct your own analysis before investing.
