Picture: 123RF/KASTO
Picture: 123RF/KASTO

New York — Warren Buffett-backed Snowflake, a software maker that debuted with 2020’s biggest US initial public offering, fell 2.1% on Thursday after reporting quarterly guidance that disappointed Wall Street, but analysts shrugged it off and boosted the stock price targets.

Morgan Stanley said the company’s fourth-quarter product revenue guidance was just in line with consensus expectations, which underperforms the big beat and raise cadence of similar high-flying recent initial public offerings. Snowflake shares have climbed 144% since its September IPO through to the end of Wednesday.

At Deutsche Bank, analyst Patrick Colville said the lower-than-expected guidance could prove conservative. Instead, the bank focused on Snowflake’s year-on-year revenue growth of 119% in the third quarter.

“This growth is suggestive of a very large TAM [total addressable market] and clear product market fit,” he said.

Deutsche Bank and Morgan Stanley boosted their price targets to $335 from $305 and to $265 from to $220, respectively. Mizuho Securities USA and Piper Sandler also increased their targets. The company now has 9 buys, 12 holds and one sell recommendations.

Snowflake listed on the New York Stock Exchange in September in a $3.36bn IPO, the largest ever for a software maker. The stock has more than doubled since then on optimism it would produce extraordinary growth, closing at $292.69 on Wednesday in New York, and pushing the company’s market value to more than $82bn.

On Wednesday, Snowflake  gave a lacklustre product sales forecast for the current quarter, signalling fierce competition in cloud computing.

Product revenue, which makes up more than 90% of sales, will be $162m  to $167m  in the period ending in January, the San Mateo, California-based company said. Analysts, on average, estimated $166m.

Snowflake’s data-warehouse software is like a vacuum sucking up information strewn across different systems, so that businesses can analyse it all together. The company competes against the cloud-computing divisions of Amazon, Microsoft  and Alphabet, as well as open-source vendor Cloudera  and database stalwart Oracle.

In the fiscal third quarter, total revenue more than doubled to $159.6m. Analysts projected $147.1m. The company reported its net loss widened to $168.9m, or $1.01 a share, from $88.1m, or $1.92 a share, in the period a year earlier.

“We are pleased with our performance this first quarter as a public company,” CEO  Frank Slootman said in the statement. “Our vision of the Snowflake Data Cloud mobilising the world’s data is clearly resonating across our customer base.”

The software maker projected product revenue of as much as $543m this fiscal year, beating analysts’ estimates of $530m.

The eight-year-old business has substantial supporters. Warren Buffett’s Berkshire Hathaway and Salesforce Ventures, an arm of Salesforce.com, each committed to buy $250m of the company’s class A common stock in a private placement.

Berkshire reported in a filing in November  that it had purchased 6.13-million shares of Snowflake valued at $1.54bn, representing 15% of shares outstanding.

Bloomberg

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