Why Snowflake Stock Declined by 11.7% in March

What happened

Shares of Snowflake (NYSE: SNOW) declined by 10.1% in March, according to data provided by S&P Global Market Intelligence.

The data cloud company saw its share price soar to a high of $390 after it went public in September last year, but it has since declined by around 41%.

Image source: Getty images.

So what

Snowflake’s fourth-quarter and full-year 2020 earnings report last month showed that revenue more than doubled year over year from $264.7 million to $592 million. Gross profit margin also improved from 56% to 59%, and the company reported 73% year-over-year growth in its customer base to reach 4,139 customers.

But investors may have been disappointed by the larger net loss incurred by Snowflake despite its soaring revenue. Net loss widened from $348.5 million to $539.1 million and the company also reported negative operating cash flow. These factors, coupled with a sell-off in technology stocks last month, probably accounted for the decline in the company’s share price.

Now what

Investors should be patient with Snowflake, though, as the company has reported strong customer metrics. Customers with over $1 million in product revenue surged by 88% year over year to 77, while its dollar-based net revenue retention rate stood at an impressive 168% for the quarter.

Snowflake continues to broaden its base of working partners, with the recent addition of Qlik onto its platform. Qlik is a data integration and analytics provider and is partnering with Snowflake to enable faster delivery of SAP data to offer clients a smoother cloud analytics experience. As the company steadily expands its ecosystem of partners, its clients should also find it stickier and contribute more to its revenue growth.

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Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Snowflake Inc.. The Motley Fool has a disclosure policy.

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