What the bad jobs report means for markets
On Thursday, KeyBanc Capital Markets adjusted their outlook on Snowflake Inc . (NYSE: NYSE:SNOW), increasing the price target to $185 from the previous $150 while keeping an Overweight rating on the shares. The firm's analyst highlighted Snowflake's impressive third fiscal quarter product revenue, which surpassed expectations by 5%, and an $18 million upward revision for the fourth fiscal quarter guidance.
The analyst noted that the recent financial results and management's discussion have positively influenced the ongoing debates regarding Snowflake's 'iceberg' storage and artificial intelligence (AI) capabilities. The quarter's success was attributed to the core business's stability, a net positive impact from 'iceberg', and the introduction of new data engineering products.
Management at Snowflake has shown increased confidence that emerging products will compensate for any possible decline in storage revenue due to 'iceberg'. Additionally, the company's AI initiatives are gaining traction, with more than 1,000 AI use-cases now in production and 3,200 customers utilizing Snowflake for AI and machine learning (ML) tasks.
The report also emphasized strong momentum in large-scale deals, including three transactions exceeding $50 million in total contract value (TCV) during the quarter. Both the remaining performance obligations (RPO) and the current RPO (cRPO) showed significant year-over-year growth rates of 55% and 36%, respectively. Looking ahead, management expects robust bookings in the fourth fiscal quarter.
KeyBanc remains bullish on Snowflake's market position as a leading data cloud provider, benefiting from the positive trends in public cloud usage. The firm also cited the rapid pace of product innovation, especially in AI, since the arrival of new leadership, and Snowflake's role in facilitating AI/General AI workloads through its user-friendly platform.
The upward revision in the price target to $185 is based on higher estimated financial performance and Snowflake's potential to tap into the substantial $300 billion total addressable market (TAM).
In other recent news, Snowflake Inc. has been the focus of several investment banking firms following the company's strong third-quarter performance. Monness Crespi Hardt, Jefferies, TD Cowen, and Piper Sandler have all maintained positive ratings on Snowflake's shares while increasing their price targets. This comes after the company's product revenue saw a significant 29% year-over-year increase, reaching $900 million, and its Remaining Performance Obligations (RPO) experienced a notable 55% year-over-year growth, reaching $5.7 billion.
RBC Capital Markets also raised its price target for Snowflake following the company's robust third-quarter performance and a promising outlook for product revenue growth. Meanwhile, Needham and DA Davidson also raised their price targets for Snowflake, reflecting the company's strong financial results. Despite these positive developments, BTIG has maintained a neutral stance, seeking more evidence of momentum with new product initiatives.
In addition to its robust financial performance, Snowflake recently acquired DataVolo to enhance its data connectivity and engineering capabilities. The company also partnered with Anthropic to integrate powerful AI models into the Snowflake Cortex, further solidifying its commitment to innovation in the data management and analytics sector.
InvestingPro Insights
To complement KeyBanc's bullish outlook on Snowflake, recent data from InvestingPro provides additional context for investors. Snowflake's market capitalization stands at $57.12 billion, reflecting its significant presence in the data cloud sector. The company's revenue growth remains strong, with a 31.21% increase over the last twelve months, aligning with KeyBanc's positive view on Snowflake's market position and product innovation.
InvestingPro Tips highlight that Snowflake holds more cash than debt on its balance sheet, which could provide financial flexibility for continued innovation and expansion in AI capabilities. However, it's worth noting that the company is not currently profitable over the last twelve months, with an adjusted operating income of -$1.25 billion.
Despite the lack of profitability, analysts predict that Snowflake will become profitable this year, which could be a catalyst for future stock performance. This projection aligns with KeyBanc's optimistic stance on Snowflake's potential to capitalize on its $300 billion total addressable market.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips that could provide deeper insights into Snowflake's financial health and market position.
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