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Snowflake slumps after weak guidance, CEO change

Published 02/28/2024, 04:32 PM
Updated 02/29/2024, 04:30 AM
© Reuters -- Snowflake (NYSE:SNOW) slumped premarket Thursday after the cloud data analytics company disappointed with its FY 2025 guidance, while announcing the surprise departure of chief executive officer Frank Slootman.

At 09.25 ET ( 09.25 GMT) Snowflake stock fell 21% in premarket trading, having closed Wednesday at $229.89.

Snowflake forecast current-quarter product revenue between $745 million and $750 million, below analysts' average estimates of $765 million. The company also guided for FY 2025 revenue growth of 22%, below the 30% widely expected, seeing spending on cloud and technology slowing down as customers struggle with an uncertain economy.

Adding to the uncertainty, Snowflake announced a change at the top, with Sridhar Ramaswamy appointed as its chief executive, succeeding Slootman. Ramaswamy had been spearheading Snowflake’s AI strategy since joining the company in May 2023. 

However, Thursday's expected share price losses may be overdone.

"We view the conservative guidance constructively as the new CEO settles in and believe this will be a back-loaded year," analysts at Jefferies said, in a note dated Fed. 29, with the investment bank keeping a 'buy' rating. 

Goldman Sachs also remains positive on the company, also keeping a 'buy' rating.

"Gen-AI remains a promising growth vector," analysts at the investment bank said, "the adoption and monetization of which could be accelerated under Mr. Ramaswamy’s leadership given his extensive AI experience."

Wells Fargo cut its 12-month price target to $225 from $235 on the back of the quarterly results, but kept its 'overweight' rating.

"With the model now reset; however, we see a favorable path for improving results through FY25 and would be buyers on any share weakness," analysts at Wells Fargo said.

For the three months ended Jan. 31, Snowflake adjusted earnings of $0.35 per diluted share, up from $0.14 a year earlier, on revenue of $774.7M, up from $589.0M a year earlier. That topped analyst estimates of $0.18 on revenue of $760.6M.

(Yasin Ebrahim contributed to this article.)

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