Snowflake Chairman Frank Slotman attends the Snowflake 2022 Summit in Las Vegas on June 14, 2022.
Snowflake | Via Reuters
Shares of Snowflake closed up 18% on Thursday, a day after the cloud software company announced that billionaire Frank Slootman would retire and be replaced by Sridhar Ramaswamy, Googleformer advertising chief of. Slotman will remain chairman of the board.
The company also reported fourth-quarter earnings results and a weaker-than-expected first-quarter outlook on Wednesday. Snowflake said first-quarter product revenue would be between $745 million and $750 million, compared with analysts’ estimates of $759 million for StreetAccount. The company said first-quarter adjusted operating margin would be 3 percent, below the 7.2 percent analysts expected.
Analysts at Morgan Stanley downgraded Snowflake shares to equal weight from overweight and cut their price target to $175 from $230, writing in a note to investors on Thursday that the company’s fourth-quarter results could open “Pandora’s box with concerns about competition”.
“The sharper-than-expected slowdown embedded in the FY25 guidance and the CEO departure are likely to increase investor concerns about Generative AI’s competition and positioning,” they wrote.
Analysts at Macquarie Equity Research wrote that Slootman’s departure was “the entry point we expected,” upgrading the stock to outperform and raising their price target to $205 from $182.
“SNOW cleared the decks with its lower guidance, but we think its strong product and sales organization mitigate C-suite uncertainty,” analysts wrote to investors in a note on Thursday. “We like Mr. Ramaswamy as CEO. His leadership and SNOW’s focus on AI/ML address our concerns about AI products.”
Ramaswamy spent 15 years at Google. He left to co-found consumer search engine Neeva in 2019, hoping it could rival Google. The company shuttered its product and was acquired by Snowflake for $185 million last year.
Prior to Slootman’s tenure, Snowflake was led by the former Microsoft CEO Bob Muglia until his sudden removal in April 2019.
— CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.
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