Snowflake’s Third Quarter Rosy, but a Chill With 2024 Outlook; Snowflake Remains a Compelling Buy

Snowflake’s third quarter experienced an unexpected snowfall, as the company beat revenue and non-GAAP EPS FactSet consensus. However, product revenue for fiscal 2024 is lighter than we had expected, bringing a chill with results, which contributed to shares falling about 5% in after hours to around $135 per share. Despite the weaker product revenue expected in the next fiscal year, we remain confident that Snowflake will be able to bounce back once through the worst of this macroeconomic environment. Consequently, we maintain our fair value estimate of $295 per share for no-moat Snowflake. This leaves Snowflake shares in attractive 5-star territory and investors with a compelling buy opportunity, in our view. As a reminder, while we do not give Snowflake a moat rating at the moment, we see early signs of moaty stickiness, as reflected in a stellar 165% net revenue retention rate.