Snowflake Chairman Frank Slootman attends the Snowflake Summit 2022 in Las Vegas on June 14, 2022.
Snowflake | Via Reuters
Shares of Snowflake dropped 20% during Thursday morning trading, a day after the cloud software company announced that billionaire CEO Frank Slootman will retire and be replaced by Sridhar Ramaswamy, Google‘s former ad chief. Slootman 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 its first-quarter product revenue will total between $745 million and $750 million, compared to analysts’ estimates of $759 million, per StreetAccount. The company said adjusted operation margin in the first quarter will be 3%, below the 7.2% analysts expected.
Morgan Stanley analysts downgraded their rating of Snowflake’s stock to equal weight from overweight and lowered their price target to $175 from $230, writing in a note to investors Thursday that the company’s fourth-quarter results could open “a Pandora’s Box of Competitive Concerns.”
“A sharper than anticipated deceleration implied in the FY25 guide and CEO departure likely spikes investor concerns around competition and positioning for Generative AI,” they wrote.
Analysts at Macquarie Equity Research wrote that Slootman’s departure is “the entry point we awaited,” upgrading the stock to an outperform and raising their target price from $182 to $205.
“SNOW cleared the decks with its lower guidance, but we think its strong product & sales org. mitigate C-suite uncertainty,” the analysts wrote to investors in a Thursday memo. “We like Mr. Ramaswamy as CEO. His leadership and SNOW’s emphasis on AI/ML address our AI product concerns.”
Ramaswamy spent 15 years at Google. He left to co-found consumer search engine Neeva in 2019, hoping it could rival Google. The company shut down its product and was acquired by Snowflake for $185 million last year.
Before Slootman’s tenure, Snowflake was helmed by former Microsoft executive Bob Muglia until his sudden ousting in April 2019.
— CNBC’s Michael Bloom and Jonathan Vanian contributed to this report.
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