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Earnings Results: Snowflake stock plunges 30% after annual forecast underwhelms

Snowflake Inc. shares were clobbered in late trading Wednesday after the software company suggested sales will not grow as quickly as expected this year.

Snowflake
SNOW,
+0.57%

reported fourth-quarter losses of $132.2 million, or 43 cents a share, on sales of $383.8 million, after losing 70 cents a share on revenue of $190 million a year ago. Analysts on average expected earnings of 3 cents a share on sales of $373 million, though many of the analysts appear to be modeling for adjusted earnings that the software company does not provide.

Snowflake’s product revenue for the full year nearly doubled, to $1.14 billion from $554 million the year before, but executives suggested the growth rate will slow to less than 70% this year with an annual forecast that missed analysts’ expectations. Snowflake shares dove to less than $185 in after-hours trading immediately following the release of the results, after closing with a 1.1% gain at $266.03.

The highflying stock has settled down after a huge welcome to Wall Street in late 2020, which included investments by Berkshire Hathaway Inc.
BRK.A,
+2.15%

BRK.B,
+2.15%

and Salesforce.com Inc.
CRM,
+0.72%

and led to the cloud-based database-software company becoming the priciest tech stock by some metrics. Shares have declined 25.6% in the past three months, but were still easily more than double the $120 share price commanded in the initial public offering at Wednesday’s closing price.

Because Snowflake is a young software company, investors tend to focus on other metrics besides profitability, including net revenue-retention rate, which measures how much existing customers are spending on the volume-priced offering, and remaining performance obligations, which measures the amount of spending that has been agreed to under contracts but not yet recognized.

Snowflake reported a net revenue-retention rate of 178% as of the end of the quarter on Jan. 31, and a remaining performance obligation of $2.6 billion, up 99% from last year and beating the average analyst estimate of $2.29 billion. Snowflake also reported that the number of customers rose to 5,944 from 4,139 a year ago, and 184 of those customers have spent more than $1 million with the company in the past 12 months.

For the first quarter, Snowflake executives forecast product revenue of $383 million to $388 million, while analysts on average were modeling $382 million, according to FactSet. For the full year, they expect product revenue of $1.88 billion to $1.9 billion, while analysts were projecting $2 billion.

Snowflake also announced the acquisition of Streamlit on Wednesday afternoon. Terms were not disclosed.

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