Snowflake pops 20% as product revenue keeps surging, analysts highlight 'strategic nature'
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Snowflake (NYSE:SNOW) shares rose almost 20% on Thursday after the data warehousing company posted strong second-quarter results and guidance, leading several Wall Street analysts to point out the company's "strategic nature."
Morgan Stanley analyst Keith Weiss, who has an overweight rating and a $274 price target on Snowflake (SNOW), said that in light of continued weakness in the software sector, being able to sustain more than 80% growth in product revenue shows how important the company's platform has become. 
"Sustained 80%+ product revenue growth in a quarter when the broader demand environment for software softened likely boosts investor confidence that Snowflake's cloud data platform is viewed as a strategic (and durable) area of investment by enterprise customers," Weiss wrote in a note to clients. 
Weiss added that the continued upward revisions to both operating income and free cash flow, along with "growing evidence" that product innovation is causing customers to move more workloads means Snowflake (SNOW) is still "one of the most attractive growth plus [free cash flow] margin stories in software."
MongoDB (MDB), Datadog (DDOG) and several other cloud-related companies, including Microsoft (MSFT) and Amazon (AMZN), rose in premarket trading. 
The Frank Slootman-led Snowflake (SNOW) said it lost 70 cents per share on $497.25M in revenue for the period ending July 31, up 82.7% year-over-year. Remaining performance obligations came in at $2.7B, up 78% year-over-year.
For the third quarter, Snowflake (SNOW) said it sees product revenue of $500M to $505M, up between 60% and 62% year-over-year. It also expects adjusted operating margins of 2% in the third quarter.
Snowflake (SNOW) also boosted its product revenue forecast for the full-year, now expected to be between $1.905B and $1.915B, a growth rate of between 67% and 68%. It also forecast an adjusted operating margin of 2% for the full-year, compared to a previous view of 1%.
Stifel analyst Brad Reback, who has a neutral rating on Snowflake (SNOW) raised his price target to $180 from $120 following the results. He noted that continued strong consumption trends and 171% net revenue retention show the company's consumption model is working.
"Net/net, we believe Snowflake's disruptive consumption-based data platform and pricing model, coupled with workload-secular growth, should generate sizable revenue growth and [free cash flow] generation," Reback wrote in a note to clients.
Credit Suisse analyst Philip Winslow, who has an outperform rating and a $250 price target on Snowflake (SNOW), noted that more stable areas such as financial services are increasing their consumption trends and a better customer base is helping the company outperform.
"Snowflake remains on the offensive, demonstrating durable secular growth despite challenging macroeconomic conditions," Winslow wrote in a note to clients. He added Snowflake (SNOW) is "a true pioneer" that "will play an increasingly important role across the entire data value chain." 
Hedge fund 3G Capital recently disclosed that it exited its stake in Snowflake (SNOW) during the second quarter, while making several other changes to its portfolio.