Snowflake is ‘a development firm with quickly slowing development,’ analyst says as inventory melts

“Snowflake is a growth company with rapidly slowing growth, which would hurt the near-term prospects for the stock,” Bernstein’s Mark Moerdler mentioned in a notice to shoppers following Wednesday afternoon’s report. “While the company is trying to improve the profitability profile, it may not be sufficient to offset the impact from growth deceleration.”

In his view, a deterioration of the financial panorama “is certainly impacting Snowflake’s growth,” however “a meaningful portion of [the company’s] growth deceleration is due to [a] non-macro-related consumption slowdown.”

Moerdler reiterated a market-perform ranking on Snowflake shares whereas lowering his value goal to $157 from $161.

Snowflake introduced a $2 billion buyback program over the subsequent two years that administration expects will assist handle dilution associated to stock-based compensation, however Guggenheim analyst John DiFucci wasn’t bought on the transfer.

“Although the company has more than $4B in cash and cash equivalents on the balance sheet, we question if this is the best use of cash for a hypergrowth company, especially considering the company remains the most expensive software stock in the entire market,” he wrote, whereas sustaining a promote ranking on the inventory.

See additionally: Snowflake plans to rent 1,000-plus employees this yr as different tech corporations lower

Elsewhere, Snowflake discovered defenders.

“Despite the mixed results, with guidance that is better than peers but lower than expected, Snowflake remains in rarified territory in the current environment as it is one of the remaining at-scale businesses growing in the ~40% range, showing overall less [deceleration] than other consumption models such as AWS, Azure, and Datadog, and guiding to a growth+margin Rule-of-65,” wrote JPMorgan’s Mark Murphy.

He added that Snowflake is “clearly not immune to challenges within the current IT spending environment or [the] volatility of consumption models” however expects that Snowflake “will see a resurgence whenever the environment normalizes and continue its path toward becoming a key layer within the modern tech stack.”

He has an obese ranking on Snowflake shares however lower his value goal to $165 from $180.

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Evercore ISI’s Kirk Materne additionally stayed bullish, sustaining an outperform ranking and $196 value goal.

“Nothing SNOW is seeing in the market in terms of consumption trends is unique to SNOW and our partners all remain very bullish about the opportunity over the long-term,” he wrote. “As such, while the revenue ‘reset’ is going to create some near-term pain, we continue to believe SNOW is one of the more unique growth stories in software at scale.”