Macquarie starts Snowflake at ‘neutral’ on balanced growth, competitive risks

Published 02/04/2025, 17:24
© Shutterstock

Investing.com -- Macquarie initiated coverage of Snowflake Inc (NYSE:SNOW) with a “Neutral” rating and a $160 price target, citing the company’s strong position in cloud data warehousing but noting risks from aggressive revenue guidance and rising competition.

“We like the company’s core cloud data warehouse opportunity and momentum, market expansion opportunities and disciplined execution,” analyst at Macquarie said.

Snowflake is disrupting the $80 billion analytic database management system (DBMS) market by offering a cloud-based data platform that consolidates information for AI-driven insights, business applications, and data sharing.

Macquarie highlighted Snowflake’s ability to expand into data engineering and AI/ML, as well as its strong execution and “Rule of 40” metrics, which indicate robust growth and profitability potential.

However, the firm expressed concerns about Snowflake’s positioning against hyperscalers in generative AI, growing competition from Databricks, and macroeconomic pressures affecting its consumption-based revenue model.

“We see some risks from more aggressive FY26 product revenue guidance, competitors’ AI positioning, and macro pressures on consumption,” analyst added.

Additionally, the company’s fiscal 2026 product revenue guidance is more aggressive, leaving less room for upside surprises compared to prior years.

Macquarie estimates Snowflake’s revenue will grow 24% year-over-year to $4.49 billion in fiscal 2026 and 23% to $5.52 billion in fiscal 2027, with free cash flow margins of 25.3% and 26.0%, respectively.

Its $160 price target is based on a blend of valuation methodologies, including a 10x enterprise value-to-revenue multiple for 2026.

Upcoming catalysts for the stock include its first-quarter earnings report in late May and an investor session at its annual customer conference in early June.

Macquarie believes Snowflake’s strengths and risks are balanced, warranting a neutral stance at current levels.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.