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On Thursday, BofA Securities analyst Brad Sills increased the price target on Snowflake Inc . (NYSE: NYSE:SNOW) shares, moving it to $205 from the previous $185, while keeping a Neutral rating on the company. Currently trading at $186.56 with a market capitalization of $61.6 billion, Snowflake has demonstrated strong momentum with a 41% gain over the past six months, according to InvestingPro data. The adjustment follows Snowflake’s stock rising 45% since the announcement of its strong third-quarter results in November. While the company maintains impressive revenue growth of 30.28% and a healthy gross profit margin of 67.3%, InvestingPro analysis indicates the stock is currently trading at fair value. Currently, the stock is trading at 39 times the estimated free cash flow (FCF) for calendar year 26, or 1.3 times its 31% growth rate. This valuation is considered a discount compared to other large-cap companies, which are trading at 1.5 times their 24% growth rate.
Sills noted that while Snowflake has shown significant growth, a discount on its valuation is justified due to the cyclical nature of its consumption business. Additionally, channel feedback indicates that Snowflake is still in the process of catching up with its competitor Databricks in key areas such as artificial intelligence (AI) and developer-led workloads. This competitive environment may be restricting Snowflake to its core data warehousing services for the time being.
The increased price target to $205 is based on an updated multiple of 43 times the forecasted FCF for calendar year 26, an increase from the prior multiple of 39 times. This change reflects an anticipation of continued growth in the fourth quarter. The new price target also accounts for the company’s growth rate, now adjusted to 1.4 times the 31% growth expected.
Sills’ commentary underscores the competitive challenges Snowflake faces, particularly against Databricks, in expanding its market presence beyond data warehousing. Despite these hurdles, the revised price target suggests confidence in Snowflake’s growth trajectory as it heads into the next quarter.
Investors and market watchers will be keeping an eye on Snowflake’s performance as the company continues to navigate the competitive landscape of data management and analytics, aiming to enhance its offerings in AI and other emerging technological domains. With analyst price targets ranging from $115 to $235 and the next earnings report due on February 26, InvestingPro subscribers can access 8 additional key insights and a comprehensive Pro Research Report, providing deeper analysis of Snowflake’s competitive position and growth prospects.
In other recent news, Snowflake Inc. has seen several developments that may interest investors. UBS has increased its price target for Snowflake to $190, maintaining a Neutral rating, citing the company’s valuation within its peer group of high-growth software firms. Meanwhile, Truist Securities continues to support Snowflake with a Buy rating and a price target of $210, highlighting the potential for the company to exceed expectations due to product innovations like Snowpark, Dynamic Tables, and Cortex. Wolfe Research has upgraded Snowflake’s stock rating to Outperform, setting a new price target of $235, based on improved consumption trends and a favorable competitive environment.
KeyBanc Capital Markets has maintained an Overweight rating on Snowflake, with a price target of $210, following a survey that indicated positive customer and partner engagement with Snowflake’s new offerings. Mizuho (NYSE:MFG) Securities also raised its price target to $205, keeping an Outperform rating, reflecting a positive outlook on Snowflake’s financial performance and improved adoption of its developer framework, Snowpark. These recent analyst actions and insights suggest varied perspectives on Snowflake’s growth potential and market positioning. Investors may find these developments significant as they evaluate Snowflake’s future prospects.
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