Snowflake Inc . (NYSE: NYSE:SNOW) experienced a revision in its stock outlook, as a Rosenblatt analyst adjusted the price target to $180 from the previous $195 while sustaining a Buy rating on the shares. The company reported its second-quarter results after the market closed, revealing a 30% growth in product revenue, which slightly exceeded expectations by approximately 3%. Snowflake's total revenue reached $868.8 million, surpassing both the analyst's projection of $851.1 million and the consensus estimate of $851.7 million.
The Q2's financial performance showcased a revenue beat and effective expense controls, leading to margins around 5%, compared to the anticipated 3%. The company's Product Gross Margins stood strong at 76%.
Snowflake anticipates certain challenges in the second half of the year, including the impact of Iceberg table support, and acknowledges that contributions from other new products may take time to materialize. For the fiscal year 2025, the company has projected a 26% growth in Product Revenue, consistent with prior estimates and slightly above the consensus forecast of 25%.
In light of the Q2 second-quarter results, the analyst has made a slight upward adjustment to the fiscal year 2025 revenue growth forecast, raising it from 24% to 25%, while maintaining the fiscal year 2026 revenue forecast at 23%. The decision to reduce the price target to $180 is influenced by lower comparable multiples and increased concerns about a potential trough in revenue growth during the second half of the year. Despite this adjustment, the analyst's Buy rating remains unchanged based on current price levels.
Snowflake Inc. has been the focus of various financial analyst firms following its strong second-quarter financial results. The company reported a 29.5% year-over-year increase in product revenue, reaching $829 million, leading to an upward revision of its fiscal year 2025 product revenue guidance to $3.356 billion.
Several analyst firms, including Piper Sandler, Baird, Canaccord Genuity, and Needham, maintained their positive ratings on Snowflake but adjusted their price targets. Goldman Sachs (NYSE:GS) maintained its Conviction Buy rating, emphasizing the company's stability in consumption and optimization trends.
Snowflake also reported a significant increase in its remaining performance obligations (RPO), which climbed to $5.2 billion, a 48% rise. The company's recent financial performance, highlighted by robust product revenue and cRPO growth, appears to be a key factor in maintaining the positive outlook.
InvestingPro Insights
As Snowflake Inc. navigates through its fiscal challenges with an eye on growth, recent data from InvestingPro offers a mixed financial picture. The company's market capitalization stands at a robust $45.22 billion, despite a negative P/E ratio of -47.96, reflecting investor confidence in its future profitability. This is further supported by a strong revenue growth of 32.85% over the last twelve months as of Q1 2023, indicating a solid expansion in its business activities.
An InvestingPro Tip highlights that analysts predict Snowflake will become profitable this year, which aligns with the company's own projections for Product Revenue growth. Moreover, Snowflake holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations, suggesting a healthy financial position for navigating near-term uncertainties.
For investors considering Snowflake's stock, it is noteworthy that the company does not pay a dividend, which may influence investment strategies focused on income. Additionally, the stock has experienced a significant decline over the last six months, with a 40.14% drop, but it's worth mentioning that there are over 7 additional InvestingPro Tips available at https://www.investing.com/pro/SNOW, which can provide deeper insights for potential investors.
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