Market reacts to Snowflake, Okta, Best Buy, Victoria's Secret earnings

Yahoo Finance Live's Julie Hyman and Brian Sozzi discuss earnings for Snowflake, Okta, Best Buy, and Victoria's Secret.

Video Transcript

JULIE HYMAN: Well, we've been having fun with the Snowflake wordplay this morning, but Snowflake shareholders aren't having too much fun. The shares are down by 18%. Now you see here, the last quarter, the company beat estimates in terms of its earnings per share and revenue, but that's not really what's relevant, relevant, here this morning.

BRIAN SOZZI: Whatever.

JULIE HYMAN: Ooh, I'm having trouble with words, speaking of wordplay. The company is down sharply after it said that sales growth is going to slow. Now, as I mentioned earlier at the top, product sales are still going to be up as much as 67% this year. But it had been posting triple digit growth. So even though it's kind of what the market expected, it's still seems to be disappointing to the market, Sozz.

BRIAN SOZZI: Yeah, Julie, Snowflake shares are falling. And why not just keep it going? Just got to have fun with it. But look, a very simple quarter here to decode. Snowflake had been growing triple digits really throughout its lifecycle, up over 100% in terms of revenue. And they come out last night saying that revenue growth this year is going to slow to 65% to 67%.

Now I didn't pick up anything-- many, many red flags from Frank Slootman-- he's the well-regarded CEO over at Snowflake-- on the earnings call per se. But again, I think this might be more of him and his team just trying to guide to something more reasonable and come out here three months from now and potentially beat it here. And it's still a company growing a lot faster than its competitors because of the services that it offers.

JULIE HYMAN: It could be. That could be what's going on. I mean, also, there's some talk about how Snowflake bills and whether that might be sort of causing some sticker shock for some of its customers. There's also a question of saturation, and are there only so many large customers that can use Snowflake services. So I guess, we'll see, Sozz, whether that's true, whether this is a sort of growth cycle issue and just a growth potential issue, or if there's something Snowflake can do to right the ship here, so to speak, in the minds of investors.

BRIAN SOZZI: Ah, a good other pun from our close friend, Jared Blikre, here. Snow needs some fresh powder from investors. So just keep them coming. If you have ones of your own, tweet at me and Julie. We're here.

JULIE HYMAN: Yeah, I like it. All right, while we're talking about software here, let's talk about Okta, too, another software company. Again, here, it is the forecast that seems to be responsible for disappointment at Okta. The company's loss per share forecast, you can see here the company, again, similar theme here, beating last quarter.

But its adjusted loss per share forecast for the first quarter right now and also for full fiscal 2023 seems to be below estimates. And so that, too, is, you know, that the party is ending a little bit, I guess, and people having to reset their expectations. This is another example of that.

BRIAN SOZZI: Yeah, also holding my hand over my nose, looking at this company's outlook, Julie. Looking for a loss of $1 to $0.27 to $1 share this year. Street was looking for a loss of $0.49. So you did get the sense from the team at Okta last night on its earnings call, they aren't using this year to invest aggressively in its business. But let's take a step back here. Even over at Snowflake, you do get the sense that these products and services they're selling remain in very strong demand, perhaps not as strong, though, as the Street was looking for, but strong nonetheless.

JULIE HYMAN: Exactly.

[BELL]

And there you have the opening bell on this Thursday morning. And we are looking at a higher open, and this despite all of the turbulence that we have had, in particular, in the commodities market. If you take a look at our opening prices here this morning, as I mentioned, futures were indicating a higher open. It looks like we're getting that higher open here this morning. NASDAQ hasn't opened quite yet, but we've got the Dow and the S&P 500 trading higher by about a 1/2 of 1%.

Now with all the whipsawing that we have been seeing in the markets here, it's pretty amazing that even given the increase that we continue to see in some commodities, that we are still seeing an upsurge in stocks as well. Wheat futures still much higher, aluminum still much higher. Pretty much metals and agricultural grains complex higher, even as we are seeing energy prices pull back a little bit.

We're going to continue to watch those trends, but we also have to watch some more earnings reports. And we got to talk about Best Buy here this morning. I know you're excited to talk about this one, Sozz. Another forecast issue here. So this continues with this theme that we have been talking about here this morning. The company says this year-- and here we are, talking about a margin story. Here, too, the last quarter wasn't quite as strong.

But here, we're talking about a margin issue, which, as we know, has been in focus for so many companies. So adjusted margin here for the full year is going to be 5.4%. It was 6% last year. And that's below estimates. So this is seemingly an issue for shareholders certainly of Best Buy.

BRIAN SOZZI: In issue, yes. And you-- it looks to be a lot of supply constraints here holding back Best Buy. Now this is something I've just seen as a consumer walking to the store, where, in key departments, whether it's computers or various electronics accessories, they just don't have the inventory, Julie, because of supply chain disruptions that have continued over from last year. And it's not just a Best Buy problem. It is an Abercrombie & Fitch problem. I believe they talked about. It's an American Eagle problem. They talked about it in their earnings release. A lot of these retailers just can't get the inventory they need right now.

But look, I think you're seeing Best Buy shares and investors ignore whatever they said about this year, that perhaps a little bit of a cautious start to this year. I'm looking at-- they put out 2025 guidance. You know, it's a great tactic here by a management team just to get the attention off any concerns here in the near-term. For 2025, Best Buy looking for sales of $53 and 1/2 billion to $56 and 1/2 billion. The Street was at about $53 billion.

Operating profits for 2025, about $3.4 billion to $3.8. The Street was at $3.1 billion. And in large part, Julie, that reflects Best Buy's transition to a membership model for a lot of its tech services here. So it looks to be them betting big on themselves that they can get customers to pay for the Geek Squad and other home installation products. And ultimately, that is a high margin revenue stream for the company.

JULIE HYMAN: Gotcha, so maybe the Street is betting that that margin forecast is a little bit conservative perhaps for this year, at least. I don't know about beyond that, if they're given those later forecasts. Let's talk about one more area that might be affected by inflation. And that's underwear. Victoria's Secret out with its numbers this morning as well, beating estimates, as you can see there.

Comparable sales up 1%. That includes direct-to-consumer. In other words, online sales. If you look at the stores only, they did actually better. Comp sales there up 12%, which, I guess, makes sense because some of their stores probably weren't open a year earlier. And the company is forecasting sales for the first quarter of up to $1 and 1/2 billion. Analysts had been looking for $1.52 billion in this case. So Victoria's Secret sort of in the midst of a turnaround attempt, I think it's fair to say, right, Sozz? So this the latest report card, as it were, on that effort.

BRIAN SOZZI: Yeah, a little bit of a soiled outlook here for this underwear trade here, Julie. But I do want to--

JULIE HYMAN: Ugh.

BRIAN SOZZI: --give a shoutout to-- ah, anyway, just keep it moving. Pretend I didn't say that. I want to give a shoutout to Matt Boss over at JP Morgan. He's out this morning here, one of the best retail analysts on the Street, lowering his price target on Victoria's Secret to $86 from $100, still maintaining his overweight rating.

And very important what he pointed out here-- said he has seen business reaccelerate in mid-February through March, in large part because of new product offerings and responses to some of their Valentine's Day offerings. So while the Street is focused here, I think, a little bit on a cautious start to the first quarter, it looks like the business may have hit an inflection point and is, in fact, gaining momentum into the spring. And that's why you're seeing the stock up here in the early going.

JULIE HYMAN: Oh, the puns today. Strong with this one. All right, we're going to take a break.