U.S. stocks edge higher; solid earnings season continues
On Wednesday, Evercore ISI analyst Kirk Materne increased the price target for Snowflake Inc . (NYSE: NYSE:SNOW) shares to $200 from the previous target of $190, while maintaining an Outperform rating on the company. According to InvestingPro data, 33 analysts have recently revised their earnings estimates upward for the upcoming period, with price targets ranging from $115 to $225. Materne anticipates that Snowflake will report a moderate outperformance in its fourth-quarter product revenue, projecting a figure around 3 percentage points higher than the Street estimates of $903.5 million, which would represent a 22.4% increase. This is slightly above the management’s guidance range of $906-911 million, indicating a 23% rise. The company has maintained strong revenue growth, with InvestingPro showing a 30.28% increase in the last twelve months and an impressive gross margin of 67.33%.
Materne noted that the holiday season might slightly impact consumption revenue by approximately one percentage point. However, he considers the Street estimates for the first-quarter product revenue of $951.7 million, reflecting a 20.5% growth, to be reasonable. Despite this, Materne suggested that the full-year outlook of 23.6% growth might be a bit optimistic, expecting the management to adopt a conservative stance on the fiscal year targets initially.
The analyst also pointed out that the reduced margin guidance provided in the last quarter could leave room for an upside, with expectations that margins will increase in FY26. Materne’s bottom line is that Snowflake is likely to deliver a "beat/bracket" performance for the fourth quarter, and he remains positive about the company’s prospects for FY26.
With Snowflake shares having risen 18% year-to-date and showing a remarkable 49.19% gain over the past six months, Materne believes that the market has already started to price in some of the optimism for FY26. Nonetheless, he maintains that the risk/reward balance leans towards the upside over a 3-6 month period. The revised price target of $200 is based on 15 times the enterprise value to CY26 sales ratio, taking into account the potential for revenue and margin improvements in FY26. InvestingPro’s comprehensive analysis indicates the stock is currently fairly valued, with additional insights available in the Pro Research Report, which provides deep-dive analysis of this $60.59 billion market cap company.
In other recent news, Snowflake Inc. has been receiving positive outlooks from several financial firms due to its strong innovation and growth potential. Wedbush Securities recently raised its price target for the company, citing Snowflake’s robust product demand and continuous innovation in artificial intelligence and machine learning. Cantor Fitzgerald initiated its coverage of Snowflake with an Overweight rating, highlighting the company’s position in the cloud data warehousing sector and its strong financial performance.
Barclays (LON:BARC) also upgraded its rating for Snowflake to Overweight, noting the company’s improved product lineup and strategic management. Similarly, Piper Sandler increased its price target for Snowflake, pointing to the company’s growth potential in artificial intelligence, data engineering, and machine learning.
In other recent developments, Databricks secured a $10 billion Series J funding round, raising its valuation to $62 billion. The funding will be used for new product development, strategic acquisitions, and international expansion. The company also outperformed Snowflake in Gartner (NYSE:IT)’s 2024 Magic Quadrant for cloud database management systems. These developments underscore the dynamic growth and competitive landscape in the data and analytics sector.
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