Snowflake unveils ambitious $ 10 billion revenue target at analyst meeting

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Snowflake hosts a three-hour meeting with analysts and investors,

The time of dreams

Snowflake

has set a target of reaching $ 10 billion in annual product revenue by fiscal 2029, the cloud data software company said today in its first meeting with analysts since its inception on the stock market last year. The company had $ 554 million in revenue produced for the financial year January 2021.

In a presentation kicking off the virtual meeting, Mike Scarpelli, CFO of Snowflake, said the company now values ​​its total addressable market at $ 90 billion, up from the $ 81 billion used on the tour. presentation of the IPO.

Investors don’t seem impressed with the long-term goal. Snowflake shares are down 4% on Thursday after-hours.

In his speech, Scarpelli explained how the company hopes to reach the goal of $ 10 billion in revenue. He says Snowflake expects the business to be driven by a growing number of customers generating more than $ 1 million in annualized revenue each. Scarpelli says the model predicts more than 1,400 customers of this size by fiscal 2029, up from 77 last year.

Snowflake predicts that the average annual revenue of these large customers will increase to $ 5.5 million, from $ 3.4 million last year. Scarpelli said the company expects revenues from these large customers to represent 77% of revenues by the end of the forecast period, up from 47% last year.

Scarpelli added that Snowflake believes he will still grow revenue from his products at a rate of 30% by the end of the period. Snowflake expects the gross margin for non-GAAP products to be 75% by fiscal 2029, up from 69% recently. He says that at the end of the target period, the company expects to have operating margins of 10% and free cash flow margins of 15% or more.

Snowflake went public in September at $ 120 a share, opened at $ 245, and made $ 429 at some point last year. The stock then reversed course, falling to $ 184.71 a month ago, before a recent surge pushed the price above its first day of trading, into the $ 250 range. He loses some of those gains Thursday night.

The stock is still the subject of a vigorous standoff between the bulls who like the company’s rapid growth and the bears who find the valuation extreme, even after the recent drop.

For its fiscal first quarter, ended April 30, Snowflake recorded an operating loss of $ 35.8 million, but reported revenue of $ 228.9 million, up 110% from to a year ago and ahead of the Wall Street consensus forecast of $ 213 million. Revenue from products, the company’s preferred performance measure, was $ 213.8 million, also up 110%.

Remaining performance bonds, an indicator of future growth, rose to $ 1.4 billion, up 206%. The net retention rate, which tracks the evolution of contract renewals less lost customers, is 168%.

The stock has risen about 10% since the results were announced on May 26.

In an interview with Barron After this earnings news, CFO Scarpelli said the company continues to deliver unprecedented growth, while increasing its gross margin on product sales to more than 72% in the quarter, from the low from the 60s a few years ago. He said the company had positive cash flow for the second consecutive quarter. Snowflake expects to break even in terms of free cash flow on an annual basis for the first time this year.

Asked about the company’s long-term growth expectations, Scarpelli predicted he would bring up the topic at the analysts meeting. There is “a huge market opportunity… we are in the right place at the right time with digital transformation… everyone is moving data from local to cloud,” he said.

In a research note providing an overview of the meeting, Mizuho analyst Gregg Moskowitz laid out the case for his bullish stance on the stock.

“Although Snowflake is trading at a substantial premium, we believe stocks have significant upside potential and are likely to outperform as the company continues to grow at high rates,” he said, repeating his rating. purchase price and its target price of $ 300. “We continue to believe that Snowflake’s cloud platform is currently ahead of the competition and its technological skills are very difficult to replicate on a large scale. “

In a note reviewing the recent earnings report, Evercore ISI Kirk Materne said he believes the analysts day and user conference “should help illustrate the great opportunity that still lies before the company, especially regarding the data sharing ecosystem “. Although he noted that the stock could remain neutral for a while as it “continues to grow in its valuation”, Materne remains a long-term bullish. He rates the action on Outperform and has a target of $ 311 for the price.


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