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Snowflake plunges as outlook suggests sales growth slowing

Mar. 02, 2022 4:36 PM ETSnowflake Inc. (SNOW)CRM, SBy: Chris Ciaccia, SA News Editor125 Comments

Snowflake corporate headquarters in Silicon Valley

Sundry Photography/iStock Editorial via Getty Images

Snowflake (NYSE:SNOW) shares plunged nearly 30% in after-hours trading, Wednesday, after the data-warehousing company reported fourth-quarter earnings that beat expectations, but forecast slowing growth ahead.

The Frank Slootman-led Snowflake (SNOW) said it

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Comments (125)

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Snowflake and Tesla are about the two toughest bubbles to pop, but they will burst too. And of course there are still the "crypto" tulip out there. Be careful folks.
Guraaf profile picture
@my_symphony2003 what would it take for Tesla bubble to pop. Seems its totally impenetrable.
@Guraaf they would need to stop growing over 50% every quarter and Elon musk would have to resign. Until then, it’s hard to see it pop and they annihalte every earnings since they sell out every car they make. They also have the truck and Tesla Semi coming which could be huge as well. Crypto isn’t really a bubble, that should be separated. It’s a store of value now for big hedges and institutions and supply is limited. I see crypto as actually a decent play right here.
I own no Tesla or Crypto, but am not ignorant to why these have held up during the fast and brutal market correction we are in the midst of.
Bernard IV profile picture
These companies will show huge net margins of 25%+ once they begin to achieve scale. Not everybody understands this.
@Bernard IV Most of people understand this, but a good company is not equivalent to a good stock, valuation matters. It's hard to hold a hot potato, it's almost impossible to hold snow flake, with warm hands, lol
Guraaf profile picture
@Bernard IV I think everyone understood that and that is why the stock is so richly valued. The problem is that they need to execute to show more than 25% net margins when they get there. And nobody is going to just hand over their money. Stock headed towards $150 by Q2 results.
Beautiful snowflake, nice to see hard to hold.
Guraaf profile picture
What are some other stocks that are likely to face a Snowflake moment in the next one year? Would like to consider shorting.
Turk Malloy profile picture
@Guraaf Just keep an eye on who is reporting earnings. If they are considered a growth company with 0 net revenue - there are good target no matter who they are.... FYI - I bought puts on LCID and made 50% . Wish I was paying closer attention to SNOW - I missed it.
Guraaf profile picture
@Turk Malloy Any more puts to buy now?
@Guraaf MDB HUBS are two that are yet to face the reckoning of revaluation. Those can both be cut in half and should absolutely be cut in half!
Drastic decline in expected growth. This goes far lower.
More “innovation” perhaps?
Rondayvous profile picture
100% of profit used to pay the TAXES on the stock based compensation, and customer acquisition is slowing. The company will do great, the executives will do better, the only losers will be investors. Time to wake up.
Turk Malloy profile picture
@Rondayvous "100% of profit used to pay the TAXES on the stock based compensation" - I need to pay better attention to the income statement for items like this
$100 soon
Nicholas Istvan Kiss, CFA profile picture
On Sale. Just like MNDY or ZS recently, I think shares will bounce back quickly after initial fall. Growth is still strong, guidance is somewhat conservative, margins will improve significantly further. There were ne bad news on earnings call either.
@Nicholas Istvan Kiss, CFA growth is not strong at all. Guiding $1.9B revs full year. Last Q was $383M, so annualized that's $1.62B. So remainder of year is only a paltry $280M additional?? Growth rates just fell off a cliff. Am I missing something?
Nicholas Istvan Kiss, CFA profile picture
@farwest yoy revenue grew 101% in Q4, that is still strong. Furthermore, remaining performance obligations, which are a good indication of future revenue growth, grew 99% yoy. That is also really strong. These are the facts.

And there is the guidance... 56% yoy growth for 2022, after growing 106% in 2021. This is obviously conservative. But as we have seen for other SaaS companies as well, they just do it this way. Guide conservative and beat. For this reason Q4 quarters have additional risk, because companies guide here for the entire next year. In order to set up a path of continous beat and raise for every quarter, they have to begin with a quite low annual estimate. I think this is what Snowflake has done. Fundamentals tell a different story.
@farwest I’ll buy in at around $110ish. 1.9B rev 66B company YIKES. 15x rev seems okay to start a position
That is exactly the problem if you buy a stock that is hugely overvalued and priced for better than perfection. Hopefully a few investors here learn a lesson or two...
Guraaf profile picture
@German-Investor What other similar stocks are there that are priced for perfection? I would like to watch them and perhaps even short.
@German-Investor a few have definitely learned a lesson of not to buy too high. I have the profits from selling short to them to prove it!
I will buy this at 15 times sales. Around $30B mcap.
bazooooka profile picture
@gygy1 but will you still want if growth slows to the point that you can get it that cheap?
03 Mar. 2022
@bazooooka excellent point
Turk Malloy profile picture
@gygy1 The great CRM which has had excellent growth AND is mightly profitable has a 7-8 ev/sales. Dont be foolish thinking 15 times sales is a good number.
Ishi Kenjo profile picture
Falling daggers!!!
Mister Doom profile picture
They have negative earnings, $300 was ridiculous.
Rondayvous profile picture
@Mister Doom Even worse than that, any earning will go to mgt, not shareholders. Over a billion in sales and investors don’t get a penny to show for it.
Only drops 30% should be the scathing headline. Maybe some value to be had after a 70% decline...
InvestingIdeas profile picture
Looks like Snowflake is melting under the heat
@InvestingIdeas this world will be running indifferently without SNOW.
Ishi Kenjo profile picture
@InvestingIdeas All the tender snowflakes flaked out on Snowflake!!!
Remember one thing about the stock market you can't believe anything anyone says about anything. Do that and you'll be safe.
Kennan Mell profile picture
@Jon Brien I don’t believe you
Iroha Isshiki profile picture
Talk about melting
AI STONKS profile picture
Winter is here..
I've often wondered about the wisdom of naming a company... Snowflake.

Perhaps no wisdom was involved.
@Serratic no two are the same
@Serratic "Snowflake" is a database schema or way of structuring information in a database. It's basically an extension of the simpler "star" schema. They allow you to write more efficient queries that aggregate results. So the name makes sense. They've taken this design and have done a nice job of adapting it for cloud environments.
What are these metrics - "performance obligations" and "net revenue retention"?

I've never followed SNOW though I worked in the area, I could never imagine them having an actual moat, but I salute them doing the best with what they had, LOL.
SquareBear profile picture
@Just Some Guy remaining performance obligation (RPO) (sometimes called performance obligations) are liabilities carried on SaaS companies balance sheets which represent the remaining portions of contracts already signed with customers… calculating the change in RPO is a proxy for bookings (recently sold contracts) growth.

Super overly-simplistic net rev retention example:
I had 2 customers last year, both at $100 ARR ($200 ARR). One of them shrinks their subscription to $80 but the other expands their subscription to $150 ($230 ARR total)... my net rev retention vs last yr is 115% ($230/$200).
@SquareBear, clear enough, but it's odd other industries don't seem to make a habit of it. The future is after all always what it is, and not truly constrained by such projections. Something they do in the SaaS area, I guess. Thanks for the explanations.
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