On Wednesday, Monness, Crespi, Hardt upgraded Snowflake Inc . (NYSE: NYSE:SNOW) shares from Neutral to Buy, setting a new price target of $140.00. The firm noted Snowflake's significant decline in stock value year-to-date in 2024 and from its peak in late 2020, which has made the valuation more appealing. Snowflake is expected to report its third-quarter fiscal year 2025 results on November 20, with a conference call scheduled for 5:00 p.m. ET.
The upgrade comes after a challenging year for Snowflake, during which its stock fell by 41% year-to-date in 2024 and 73% from its high in late 2020. Monness, Crespi, Hardt sees the current valuation as an opportunity, particularly in light of Snowflake's increased pace of innovation throughout the year. The firm anticipates that the results of these innovations will start to materialize over the next 12 to 18 months.
Snowflake's strategy has been contrasted with broader trends in the software industry and the tech world, which have seen widespread restructuring initiatives. The firm believes that Snowflake has avoided such drastic measures, positioning itself with the potential to leverage powerful margin improvements in the future if needed.
The analyst's commentary highlighted that the general artificial intelligence (AI) hype of 2023 did not translate into expected revenues for the software sector in 2024. Nonetheless, the firm is optimistic that Snowflake, along with the industry, will start to see incremental benefits from the long-term secular trend of AI over the next 12 to 18 months.
Snowflake's upcoming earnings call is anticipated to provide further insights into the company's performance and the potential impact of its innovation efforts. The upgrade to a Buy rating reflects the firm's confidence in Snowflake's prospects amid a period of recalibration for the tech industry.
In other recent news, Snowflake Inc. has been the focus of numerous analyst ratings and financial milestones. Truist Securities, Citi, Stifel, TD Cowen, and DA Davidson have all maintained their Buy ratings on Snowflake, while Morgan Stanley (NYSE:MS) reiterated its Equalweight rating. The price targets set by these firms range from $165 to $210, reflecting confidence in Snowflake's financial strategy and future performance.
Snowflake recently completed a significant $2.3 billion convertible debt offering, which was positively received by various analyst firms. This financial milestone was accompanied by a robust 30% year-over-year increase in product revenue, reaching $829 million for its second quarter of fiscal year 2025. Following this strong performance, Snowflake raised its full-year product revenue outlook.
These recent developments suggest that Snowflake's core SQL business is expected to maintain a growth rate of over 20%. Furthermore, the potential for new products to contribute to growth as they mature supports the anticipation that Snowflake could sustain mid-20% revenue growth in the upcoming years. These are the latest developments in Snowflake's ongoing commitment to improved execution and quicker product innovation.
InvestingPro Insights
As Snowflake (NYSE: SNOW) prepares to report its Q3 fiscal 2025 results, InvestingPro data offers additional context to the Monness, Crespi, Hardt upgrade. Despite the stock's significant decline, which aligns with the InvestingPro Tip noting that "Stock has taken a big hit over the last six months," Snowflake's financials show a company in growth mode. The company's revenue growth stands at 31.21% over the last twelve months, with a robust gross profit margin of 67.83%.
However, profitability remains a challenge, as highlighted by another InvestingPro Tip: "Not profitable over the last twelve months." This is reflected in the negative operating income margin of -38.89%. Yet, analysts remain optimistic, with an InvestingPro Tip suggesting that "Analysts predict the company will be profitable this year."
For investors considering Snowflake's potential, it's worth noting that the company "Holds more cash than debt on its balance sheet," according to an InvestingPro Tip. This financial stability could support the innovation efforts mentioned in the analyst's upgrade.
InvestingPro offers 8 additional tips for Snowflake, providing a more comprehensive analysis for those looking to dive deeper into the company's prospects.
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