Consumption-oriented software businesses have experienced a tough recent stretch, but Snowflake Inc. is winning cheers Thursday for showing signs of improvement.
“We view a stabilized/improving consumption environment as driving revenue upside in the short term, while the company’s growing arsenal of new product introductions should begin to bear fruit over the medium-/longer-term,” Needham analyst Mike Cikos wrote, while upping his price target to $225 from $216 and keeping a buy rating on the stock.
Snowflake’s outlook came in ahead of expectations, and Truist Securities analyst Joel Fishbein mused that it could still be conservative.
“One of the themes of the call was the heavy product investments Snowflake has made the last few years, with many of these capabilities expected to become available to the broader customer base over the next several quarters,” he said.
Fishbein, who has a buy rating on Snowflake’s stock, boosted his price target to $210 from $200 in his latest note.
Others were more measured, with Bernstein’s Mark Moerdler writing that the latest beat came against lowered expectations.
“We remain concerned about Snowflake’s ability to meaningfully outperform their long term revenue guidance,” he said. “We also note that the leading indicators this quarter were still weak (deferred revenue was in-line with the street and [remaining performance obligations] missed by almost 5%), and the company is guiding to another 4-5% deceleration next quarter in revenue. Even if they beat the guide by as much as they did this quarter it would be in-line with consensus’ prior expectations.”
In Moerdler’s view, “the trough isn’t here yet.” He rates the stock at market perform with a $160 target price.
Guggenheim analyst John DiFucci titled his note to clients: “Sounds Better, Looks the Same?”
“Based on our field checks and recent software results, it doesn’t appear that the IT spending environment is getting better, and frankly we think the macro backdrop will…likely deteriorate from here into [fiscal 2024], but a wise man recently told us that it’s as simple as this: When interest rates go down, you buy growth,” DiFucci wrote.
Snowflake, he noted, “is a growth stock and this was the first time in a year that they raised annual guidance.”
He has a sell rating on the stock, though he upped his price target to $120 from $105 early Thursday.