Snowflake stock is dropping as the street hopes for more sales to come

snowflake (snow) reported a loss for the April quarter which was in line with estimates while revenue beat Wall Street targets, although growth slowed. Snowflake stock fell on Thursday as product revenue expectations came in only slightly ahead of views.


“Snowflake’s first-quarter product revenue growth reflects slowing consumption patterns on overall headwinds in April, which impacted activity among select high-growth customers due to increased demand in the prior year,” JPMorgan analyst Mark Murphy said in a report. “However, despite the immediate impact on higher revenue, we remain impressed with the company’s strong free cash flow generation and long-term growth trajectory at scale.”

At Cowen, analyst Derek Wood said, “Management has indicated that consumption growth on its platform is trending lower in April, weighed down by a handful of larger customers in consumer-facing markets who are seeing slowing end-market demand.”

The enterprise software maker reported a loss of 53 cents a share in Snowflake using generally accepted accounting principles, or GAAP, compared to a loss of 70 cents a share the previous year.

Analysts polled by FactSet had expected the company to report a loss of 53 cents per share.

Snowflake stock is down 10.9% to 118.30 in early trade on stock market today. The company released its earnings after the market closed on Wednesday.

Snowflake Inventory: Product Revenue Guide Meets Views

Analysts also estimated that Snowflake would report zero cent earnings on an adjusted basis. But the company does not separate adjusted earnings into its releases.

Snowflake said first-quarter revenue jumped 85% to $422.4 million from a year earlier. Analysts estimated Snowflake’s revenue at $413.7 million. Revenue is up 101% and 110% in the previous two quarters.

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Snowflake’s earnings report said product revenue rose 84% to $394.4 million versus estimates of $389 million.

For the current quarter ending in July, Snowflake said it expects product revenue to come in at $437.5 million midway indicative versus analyst estimates of $436.6 million.

Stocks down 61% for 2022

In addition, Snowflake said it now has 206 customers with “12-month excess product revenue in excess of $1 million,” up from 184 customers on January 31.

Snowflake sells data analysis and management tools that run on cloud computing platforms such as Amazon Web Services, and is part of (AMZN).

However, Snowflake is not a SaaS company. Instead, it uses a consumption-based business model based on how much data its customers store and store.

“Given the high volatility of the consumption-based revenue model, Snowflake’s business interacts in real time with significantly affected customers by adjusting and optimizing their consumption,” Deutsche Bank analyst Brad Zelnick said in a report. “We note that management has indicated that they are only seeing a decrease in consumption from high-growth consumer technology companies and no real impact from other customers.”

As Snowflake’s earnings report nears, software stock is down 61% in 2022. Snowflake’s stock carries a relative strength rating of 10 of the top 99 possible, according to IBD stock check.

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