Snowflake (SNOW) Tops Q2 Sales and Guidance Expectations, Analysts Raise PTs Despite Wider-than-Expected Loss

Shares of Snowflake (NYSE: SNOW) are up over 3% in pre-open after the company reported better-than-expected Q2 sales.

SNOW reported Q2 EPS of negative $0.64, much worse than the analyst estimate of $0.15. Revenue for the quarter came in at $272.2 million versus the consensus estimate of $256.54 million.

“Snowflake saw continued momentum in Q2 with triple-digit growth in product revenue, reflecting strength in customer consumption. While increasing net revenue retention rate to 169%, we also boosted gross margin and operating margin efficiency while our adjusted free cash flow was positive for the third quarter in a row,” said Snowflake Chairman and CEO Frank Slootman.

SNOW said it expects Q3 product sales between $280 million and $285 million, higher than the analyst consensus of $270.5 million.

Despite a wider-than-expected Q2 loss, at least four research firms raised their price targets on SNOW on stronger-than-expected sales and guidance.

JMP analyst Patrick Walravens maintained a “Market Outperform” rating on SNOW and raised the price target to $320.00 per share from the prior $300.00.

“We view Snowflake as an excellent opportunity for long-term capital appreciation for several reasons, including: 1) Snowflake's cloud data platform is disrupting the database management systems market, which at $65B is the second biggest of the 18 software markets according Gartner and is the fastest growing of the 18; 2) Snowflake has a highly differentiated, modern cloud-native architecture; 3) the business uses a consumption model and is demonstrating best-in-class net retention rates; 4) the team executing against Snowflake's vision is one of the strongest teams in the software industry; and 5) demonstrating its strong product-market fit, Snowflake has landed nearly 5,000 customers, including 212 of the Fortune 500, and 116 customers that generate over $1M per year in product revenue,” Walravens said in a client note.

Cowen analyst J. Derrick Wood raised the price target to $335.00 per share from $310.00 on the Outperform-rated SNOW on “strong” Q2.

“Shares traded up AH (~4%) which we attribute to a clean top-line upside qtr, commentary on accelerated ACV bookings & a very strong FCF guide to boot. As the fastest growing company in enterprise software (+94% in CY21 vs +88% prior), and with a transformative vision around Data Cloud that positions for both legacy displacements and greenfield use-case/workload innovation, we think SNOW continues to command a larger premium,” Wood wrote in a client note.

Similarly, Mizuho’s Gregg Moskowitz also raised the price target to $340.00 per share from $320.00 as he says strong consumption trends can only get better in H2.

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