Evercore ISI remains bullish on Snowflake stock, holds Outperform rating

On Thursday, Evercore ISI maintained a positive stance on Snowflake Inc . (NYSE: NYSE:SNOW), reiterating an Outperform rating alongside a $170.00 price target. The firm recognized Snowflake's solid quarterly performance, highlighting that the company's product revenue reached $829.3 million, marking a 30% increase and surpassing the anticipated growth range of 26-27%. This achievement, albeit slightly below some expectations, was seen as a testament to the robustness of Snowflake's core business and a sign of stabilizing consumption patterns.

Remaining optimistic about the company's future, the firm noted Snowflake's substantial growth in remaining performance obligations (RPO), which climbed to $5.2 billion, a 48% rise. This was partly attributed to Snowflake securing two significant nine-figure deals within the quarter.

Confidence in Snowflake's large deal pipeline was cited as a reason for the company raising its fiscal year 2025 guidance, despite the forecast suggesting a deceleration in product revenue in the second half of the year due to challenges from Iceberg and insufficient near-term compensation from new AI products.

Snowflake's management expressed confidence in the current steady consumption trends, as observed in August, which supported an increase in the fiscal third-quarter guidance. However, the firm anticipates the stock will experience volatility as investors weigh the potential risks and rewards.

The stock is expected to face contention between optimistic and cautious investors until a clear trend in subscription revenue is established, potentially by the fiscal fourth quarter or the first quarter of the following fiscal year.

The report concluded by emphasizing the potential for Snowflake's stock to favor investors in the long run, especially with the introduction of new AI products expected in fiscal year 2026 and a return to a more normalized optimization environment.

Despite the near-term headwinds and the stock's current "penalty box" status, Evercore ISI affirmed its Outperform rating and $170 price target, based on 14.5 times the enterprise value to calendar year 2025 revenue.

In other recent news, Snowflake Inc. has reported significant growth in its product revenue, reaching $829 million, an increase of 29.5% year over year, surpassing market expectations. The company's gross profit and operating income also exceeded estimates.

This robust performance led Snowflake to raise its fiscal year 2025 product revenue guidance to $3.356 billion, up 26% year over year. Despite these results, BTIG maintained a Neutral rating on Snowflake's stock due to competitive pressures.

Concurrently, several financial analyst firms revised their outlooks on Snowflake. DA Davidson lowered its price target for the company to $175 from $230, while still maintaining a Buy rating. Loop Capital also reduced its price target but kept a Buy rating, anticipating that Snowflake will surpass high-end product revenue and non-GAAP EPS estimates.

Baird adjusted its price target for Snowflake shares, citing weaker initial guidance and leadership transition, while maintaining an Outperform rating. Citi likewise, lowered its price target for Snowflake shares while maintaining a Buy rating.

InvestingPro Insights

Complementing Evercore ISI's optimistic outlook on Snowflake Inc. (NYSE: SNOW), the current financial metrics and InvestingPro Tips offer additional insights into the company's financial health and market position. With a market capitalization of $45.22 billion, Snowflake is a significant player in its sector. Despite not being profitable over the last twelve months, the company's liquid assets surpass its short-term obligations, indicating a strong liquidity position. This is further supported by the fact that Snowflake holds more cash than debt on its balance sheet.

Investors considering Snowflake should note that the company is trading at a high revenue valuation multiple, with a Price/Book ratio of 9.92, reflecting a premium market valuation. The revenue growth remains robust at 32.85% over the last twelve months as of Q1 2025, which aligns with the firm's positive stance on the company's growth prospects. Analysts predict that Snowflake will turn profitable this year, which may be a pivotal point for investor sentiment. However, it's worth noting that Snowflake does not pay a dividend, which could be a consideration for income-focused investors.

For those interested in a deeper dive into Snowflake's financials and future outlook, there are additional InvestingPro Tips available at InvestingPro. These tips can provide more nuanced guidance for investors looking to make informed decisions regarding Snowflake's stock.

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