Snowflake (SNOW) Net Revenue Retention Rate and Guidance To Watch

SNOW is expected to show a rise in quarterly revenue with a 26.3% increase in revenue to $851.163 million from $674.02 million a year ago.

The consensus earnings per share currently stand at 16 cents per share.

In June, widespread attacks targeting Snowflake customers led to a “significant” volume of data stolen and more than 100 customers known to be potentially impacted, according to researchers from Mandiant.

Neiman Marcus Group had been among the latest to join the list of victims of the Snowflake attacks. Troy Hunt, founder of the breach research site Have I Been Pwned, reportedly told BleepingComputer that email addresses belonging to more than 31 million customers of the retailer have been found to be exposed in the Snowflake-related attack.

Other impacted companies in the Snowflake campaign have included Santander Bank, Pure Storage and Advance Auto Parts. The wave of data theft attacks are believed to be utilizing stolen passwords.

There have been concerns about customer retention issues following a data breach and high valuation, so this is something that we might need to take note.

SNOW has continued to decline despite market growth, reflecting concerns about slowing business growth and rising operating costs.

SNOW has been suffering from challenging macroeconomic conditions, including persistent inflation, which have hurt customer spending patterns. Increased GPU-related costs as Snowflake aggressively invests in AI initiatives are expected to have kept margins under pressure. Moreover, stiff competition from the likes of Databricks and increasing pricing pressure.

However, SNOW’s top-line growth is expected to have benefited from a strong portfolio with new capabilities, including Marketplace Listing Auto-Fulfillment & Monetization, account replication & failover, Query Acceleration Service, geospatial analytics and Snowpipe Streaming.

But that does not really help SNOW so far in its year-to-date for its investors.

SNOW has suffered more than 30% of its stock price year-to-date, this is because of multiple factors including the data breach, and SNOW is still grappling with slowing business growth and rising operating costs.

I would expect their operating costs to go up because they would have to spend quite a significant amount on mitigating the data breach, and also to do up the regulatory. Not including the compensation to their customers, customers might be terminating services earlier and the acquisition of new customers would be a challenges, with other competitors like Databrick gearing up to capture more market share.

Based on 33 Wall Street analysts offering 12 month price targets for Snowflake in the last 3 months. The average price target is $200.97 with a high forecast of $236.00 and a low forecast of $160.00. The average price target represents a 52.92% change from the last price of $131.42.

I would not be expecting SNOW to move much post its earnings, if the results beat estimates, because there is still quite a bit for SNOW to handle following the high valuation challenges.

Despite the challenges from data breach impact to slow business growth, SNOW is still showing potential from the technical side.

As seen in the chart below, MACD is forming a nice upward trend, followed by KDJ giving an upside confirmation. But this might be short term as we need to look at how the rising operating costs and impact on its customer growth is like.

Because this would affect the future stock price if we saw declining net revenue retention rate and poor guidance for EBIT margin.

I think we would need to watch the earnings closely as for the Q1 financial results, SNOW report declining net revenue retention rate and poor guidance for EBIT margin. That is considered weak.

So I would be expecting similar or maybe slight worse because of the concerns about customer retention issues following a data breach and high valuation multiples.

Appreciate if you could share your thoughts in the comment section whether you think SNOW would be able to beat its Q1 financial results or give a similar results?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.