Why Many Analysts Think Snowflake Stock Will Keep Soaring After Earnings

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Snowflake’s latest results impressed Wall Street.

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Courtesy NYSE

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Snowflake stock was rising on Thursday after the company — which specializes in cloud-based data services — posted quarterly earnings that broke Wall Street’s expectations. Many analysts say there are reasons to think stocks will continue to rally.

Snowflake (ticker: SNOW) rose more than 11% to $346.67 on Thursday. The stock has climbed nearly 23% so far this year, jumping higher with the latest jump from financial results released after the market close on Wednesday. Revenue rose 110% to $334 million, nearly 10% ahead of analysts’ consensus expectations.

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The company’s results triggered a wave of increases in stock price targets from brokers, according to data from FactSet, with at least 16 analysts raising their projections for the shares’ trajectory between Wednesday and Thursday.

The stock now has an average price target of $388.36, based on estimates from 22 analysts entered by the data provider, with most of the company giving a buy rating. With shares trading around $347 on Thursday, that means an average upside view of about 12%.

In fact, there’s a solid case for growing rapidly at the fast-growing company, which is based in Bozeman, Montana, and essentially provides cloud-based “warehousing” services for companies’ data, including storage and analytics.

“Snowflake delivered a monster quarter highlighted by a re-acceleration in product revenues,” wrote a team of analysts led by Kirk Mattern at investment bank Evercore ISI.

Given the strong revenue beat, Materna’s group highlighted upbeat guidance for fourth-quarter product revenue growth of 94% to 96%. He added that this forecast “helps to illustrate why trends in the business are sustainable and why Snowflake is one of the truly unique hyper-growth stories in software.”

Matterne and other analysts specifically pointed to opportunities with Fortune 500 clients, growth potential in public sector clients, and higher customer retention rates.

“Clearly, if the macro backdrop remains volatile, Snowflake will not be immune to more market changes,” the Evercore team said. “But for investors with a long-term outlook, we believe Snowflake represents one of the most unique growth stories in software in some time and the long-term risk/reward remains attractive.”

Evercore rates Snowflake to outperform and put a $400 price target on the stock, down from $380 a month ago.

The same sentiment was shared at JPMorgan, where analysts led by Mark Murphy called Snowflake “an elite software company and a top idea for non-valuation-sensitive strategies.”

JPMorgan considers Wall Street’s consensus expectations for next year too low, and expects an upward revision over time. JP Morgan rated Snowflake Neutral with a price target of $340.

Murphy’s team said, “In our view, a strong premium valuation is highly warranted, and a path to $10 billion in revenue with a 15%+ free cash flow margin by FY29 should remain in focus as the opportunity continues to evolve.” ” “Despite our very favorable view of the technology and the company, our rating is neutral as we believe the risk/reward is fairly balanced at current price levels.”

Kamil Milkzarek, an analyst at investment bank William Blair, said Snowflake showed strong growth across Europe, the Middle East and Africa as well as the Asia-Pacific region—and added that there were significant opportunities for more global growth.

However, Milkzarek, who rates Snowflake in Market Performance, said his neutral rating was due in large part to the valuation not factoring in the many downside risks.

“Risks include declining investment in sales and marketing, as well as slower growth from intense competition from hyperscale cloud providers, legacy vendors and new market entrants,” Milkzarek said.

Write to Jack Denton at [email protected]

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