On Tuesday, Loop Capital reiterated a Buy rating and a price target of $185.00 for Snowflake Inc . (NYSE: NYSE:SNOW), ahead of the company's third-quarter fiscal year 2025 earnings report, which is scheduled to be released after the market closes on Wednesday, November 20, 2024.
The firm's analyst expressed confidence in Snowflake's performance, anticipating that the company will surpass the product revenue estimate of $856 million, which marks a 29.5% growth and is slightly above the company's provided guidance.
Loop Capital's optimism is rooted in Snowflake's consistent track record of product revenue outperformance, with an average beat of approximately 3.5% over the past eight quarters. This expectation is further supported by the firm's October findings, which indicated that customer consumption and purchasing behaviors remained stable compared to previous periods.
Additionally, growth rates for cloud service providers Azure and AWS, which were reported at 34% year-over-year for Azure and 19% for AWS, are expected to be a positive indicator of Snowflake's impending quarterly results.
Despite the positive outlook, Snowflake faces several challenges that have made it a contentious stock among investors. The primary concerns include a deceleration in growth within the core cloud data warehouse segment, a strategic overhaul of the company's market approach by the new CEO aimed at accelerating growth, and the need to adapt to a competitive landscape increasingly shaped by artificial intelligence (AI).
Loop Capital believes that Snowflake's shift to a consumption-focused sales strategy is appropriate and is confident in the company's potential to manage data science workloads effectively, especially as AI becomes more integral to enterprise data infrastructure.
In conclusion, Loop Capital has maintained its Buy rating on Snowflake Inc., with a firm belief that the company is well-positioned to capitalize on the emerging AI opportunity and that the new sales strategy will eventually lead to increased customer engagement with Snowflake's offerings. The upcoming earnings report is awaited as an indicator of the company's current performance and prospects.
In other recent news, Snowflake Inc. has reported a 30% year-over-year increase in product revenue, reaching $829 million for the second quarter of fiscal year 2025, and has raised its full-year product revenue outlook. The company also completed a substantial $2.3 billion convertible debt offering.
In the world of analyst reviews, Rosenblatt Securities maintained a Buy rating on Snowflake, reiterating a price target of $180. Meanwhile, Citi held its Buy rating, but adjusted the price target to $183, and Piper Sandler confirmed its Overweight rating on Snowflake with a steady price target of $165.
Other firms like Monness Crespi Hardt upgraded Snowflake from Neutral to Buy with a new price target of $140, while Evercore ISI and Goldman Sachs maintained positive stances on Snowflake, with price targets of $170 and $220 respectively.
Snowflake has also announced several enhancements to its data platform and new AI features. These advancements aim to simplify the creation of conversational apps, improve data readiness, and enable enterprises to process large inference jobs with guaranteed throughput.
InvestingPro Insights
As Snowflake Inc. (NYSE: SNOW) approaches its third-quarter fiscal year 2025 earnings report, InvestingPro data provides additional context to Loop Capital's optimistic outlook. The company's revenue growth remains strong, with a 31.21% increase over the last twelve months, aligning with Loop Capital's expectation of continued growth. However, it's worth noting that Snowflake's quarterly revenue growth has slightly decelerated to 28.9%, which may be a point of interest in the upcoming earnings call.
InvestingPro Tips highlight that Snowflake holds more cash than debt on its balance sheet, potentially providing financial flexibility as it navigates its strategic overhaul and adapts to the AI-driven competitive landscape. This strong cash position could be crucial for funding innovation and market expansion efforts.
Despite the positive revenue trajectory, an InvestingPro Tip indicates that Snowflake is not profitable over the last twelve months, with an adjusted operating income of -$1,247.1 million. This aligns with the challenges mentioned in the article and underscores the importance of the company's new consumption-focused sales strategy in driving future profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Snowflake on the platform.
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