DELL - Snowflake's Decline May Not Be Over
2024-06-17 11:05:22 ET
Summary
- Snowflake faces challenges with slower growth and tighter margins in FY25, exacerbated by a major security breach affecting major customers like Ticketmaster and Advanced Auto Parts.
- Management forecasts tighter operating margins for FY25 due to increased costs from AI initiatives, GPUs, and the recent acquisition of TruEra.
- I anticipate that the sales cycle may become elongated as a result of the breach and may lead to customers considering private storage over cloud storage.
Snowflake ( SNOW ) is finding itself in a challenging position as management forecast a slowdown in top-line growth for FY25 paired with tighter margins resulting from higher operating costs. Snowflake has also found itself in the middle of a major security breach at the customer level that has resulted in major data leakages out of these companies’ Snowflake databases. Though Snowflake’s security posture was not compromised, I believe that the association with the security breach may have a negative effect on new customer acquisition and may lead to current customers rethinking their use of cloud storage with Snowflake. Given these factors, I reiterate my SELL recommendation with a price target of $114.47/share at 10.58x FY26 price/sales....
Snowflake's Decline May Not Be Over