Snowflake (SNOW) shares picked up a new fan on Friday.
Raymond James analyst Simon Leopold launched coverage of the cloud data warehouse provider with an Outperform rating and $184 price target, which would be about a 33% return from the closing price of $138.24 on Thursday.
Snowflake (ticker: SNOW) shares have been gyrating since the company posted April quarter financial results last week. Revenue in the quarter was $394.4 million, up 84% from a year ago, which was ahead of the company's guidance range.
But that nonetheless represented some deceleration in growth, with the narrowest margin between actual and projected revenue in any quarter since the company came public at $120 a share in September 2020.
Snowflake told investors on the company's quarterly conference call that a handful of large customers had recently shown decelerating growth in their use of the platform. Given the company has a consumption-based business model, that translates into a direct impact on revenue growth.
While Snowflake has declined to name names, Citi analyst Tyler Radke told Barron's that the issue involved delivery and crypto clients, including DoorDash (DASH), Instacart, and Coinbase Global (COIN).
"Last year, we saw certain customers experience much higher than expected consumption," Snowflake chief financial officer Mike Scarpelli said on the call. "Today, some customers face a more-challenging operating environment. Specific customers consumed less than we anticipated amid shifting economic circumstances, [which] we believe are unique to their businesses, most notably consumer-facing cloud companies."
In picking up coverage, Leopold writes in a research note that Snowflake is "a share gainer in a massive market," but noted that the stock is off roughly 70% since November's peak at about $400 a share.
Snowflake has projected it should hit $4 billion in product revenue by the January 2029 fiscal year, and Leopold thinks the company could get there a year early. He notes that "the backdrop for enterprise software spend is strong."
The analyst thinks Snowflake can grow annual free cash flow to more than $1 billion as soon as calendar 2025.
Despite the endorsement, Snowflake shares on Friday are off 6.1%, to $129.82, amid a broad selloff in tech shares.
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