Hard times will always reveal true friends, as the saying goes, and Sridhar Ramaswamy can certainly attest to that.
The chief executive of Snowflake (SNOW) has seen some awfully rough days after the cloud-storage and -analytics company reported in May that it had been hit by a cyberattack.
Related: Analysts revamp Snowflake stock price target after earnings
“Nothing brings to life how strong and trusted a relationship is than when you go through challenges together,” Ramaswamy told analysts during the Bozeman, Mont., company’s Aug. 21 second-quarter-earnings call. “We obviously had some rough headlines in the quarter as some of our customers dealt with the cybersecurity threat.”
Google Cloud’s Mandiant cybersecurity consulting arm said in June that it had notified roughly 165 organizations that their data might have been exposed.
AT&T (T) was among those organizations. The telecommunications giant said in a July 12 regulatory filing that hackers stole six months’ of call and text-message records of nearly every AT&T cellular network customer.
“While the data does not include customer names, there are often ways, using publicly available online tools, to find the name associated with a specific telephone number,” the company said.
Mandiant attributed the hack to a financially motivated group it calls UNC5537, with members in North America and Turkey.
Sridhar Ramaswamy, CEO of Snowflake
Snowflake/TheStreet
Snowflake CEO: ‘We are all in it together’
The FBI, the U.S. Department of Justice and the Federal Communications Commission are all investigating the incident.
“As extensively reported, the issue wasn’t on the Snowflake side,” Ramaswamy said during the call. “After multiple investigations by internal and external cybersecurity experts, we found no evidence that our platform was breached or compromised. However, we understand that when it comes to cybersecurity, we are all in it together.”
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“My one ask of all businesses around the world, whether they’re a Snowflake customer or not, is to enable and enforce multifactor authentication in your organization and ensure that you have network policies as strong as possible, two things we at Snowflake have supported since 2016,” he added.
Snowflake Chief Financial Officer Mike Scarpelli said the impact of last month’s CrowdStrike IT (CRWD) outage, where a faulty update resulted a massive global shutdown, was “minimal.”
“It was a day with a few customers, but nothing of any substance,” he said. “And that never really impacted us itself.”
Snowflake reported adjusted second-quarter profit of 18 cents a share, compared with 22 cents in the year-earlier period. Analysts polled by FactSet expected Snowflake to earn 16 cents a share.
Revenue totaled $868 million, up 29% from a year earlier and topping Wall Street’s call for $852 million in sales.
Ramaswamy reminded analysts of “a lot of bright spots in the quarter,” with none more noteworthy than the time he spent with over 100 customers, “many of them on my travels to the U.K., Germany, Canada and across the U.S. And of course, a Snowflake Summit in June.”
“The affinity for our product is incredible,” he said. “And the consistent theme I hear from the C suite across industries and geographies is that Snowflake is delivering ease, efficiency and reliability to their business.”
Snowflake shares were tumbling 13% at last check to $117.39. The stock is down nearly 41% year-to-date and off 23% from a year earlier.
TheStreet Pro’s Bruce Kamich reviewed Snowflake’s results and wrote in his Aug, 22 column that “despite a beat, traders sold off the stock on Thursday morning.”
“Will the early August low be retested?” he asked. “Maybe. Is this decline an opportunity to buy? It’s too early to tell. Overall, the charts and indicators are mixed to bearish and traders should focus on other opportunities.”
Analysts update price targets for Snowflake
Several analysts updated their price targets for the company following the earnings report.
Wedbush analyst Taz Koujalgi slashed his price target on Snowflake to $140 from $210 and maintained a neutral rating on the stock.
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Snowflake’s second-quarter numbers came in above Wall Street’s estimates/guide for product revenue and margins, but the quarter-over-quarter increase in product revenue dollars was lower than the q/q dollar increase in the prior quarter, he said.
“Typically, the q/q growth in product revenues has always been higher in a Q2 vs. Q1, and hence this raises some questions about usage/consumption slowing down,” Koujalgi said.
Snowflake clarified that it saw no impact to consumption from the security breaches that were reported during the quarter and the impact from the CrowdStrike outage was minimal, the analyst told investors in a research note.
Bernstein cut its price target on Snowflake to $130 from $185 and affirmed a market perform, effectively neutral, rating on the shares after the company delivered a smaller-than-normal beat of estimates and guided weaker than Wall Street expected, the investment firm said.
However, the firm said the real issue is what it called a “disconnect” between the strength in remaining performance obligations and net revenue retention versus the guidance.
In addition, the overall company and its artificial intelligence strategies are “still difficult to decipher and new products are still too small to have a major impact on revenue next year,” the firm said.
Bernstein said a lack of clarity around what to expect from Snowflake continues.
JMP analyst ‘continues to like the story’
JMP Securities analyst Patrick Walravens lowered the firm’s price target on Snowflake to $190 from $235 and kept an outperform rating on the shares.
Snowflake reported mostly strong quarterly results, but with a “skinnier” product-revenue beat than it has reported in the past. And it had to work through some “rough headlines” as its customers addressed the cybersecurity threats and data breaches, the analyst said.
Walravens said that he continued to like this story, as the core business is driving significant customer value, reflected in 30% product revenue growth, nine-figure customers, and particular strength in financial services and technology segments.
The company has increased its innovation and product delivery under Ramaswamy, who became CEO in February, with new products and capabilities like Cortex, Managed Iceberg Tables, support for unstructured data, and Notebooks, the analyst said.
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