On Thursday, RBC Capital Markets reiterated its positive stance on Snowflake Inc . (NYSE: NYSE:SNOW), raising the cloud-based data warehousing company's price target to $188 from $175. The firm maintained its Outperform rating on the stock, following Snowflake's robust third-quarter performance and an encouraging outlook for product revenue growth.
Snowflake's latest earnings report showed substantial growth, with the company's FY/25 product revenue guidance increasing to reflect a 29% growth rate, up from the previously anticipated 26%. The company's Remaining Performance Obligations (RPO) also saw a significant acceleration, with a 55% growth rate. Bookings were strong, propelled by a surge in large-volume deals.
The demand for Snowflake's offerings was widespread, as indicated by the management's note on multiple competitive displacements. This broad-based demand underpins the company's solid quarterly results and optimistic guidance. In light of these developments, RBC Capital has revised its FY/26 growth estimates slightly downwards to remain conservative, while still expressing confidence in Snowflake's market potential.
The adjustment in the price target reflects a wider trend of peer multiple expansion, which suggests a growing recognition of the value within the industry segment that Snowflake operates in. RBC Capital's updated target is a testament to their bullish outlook on the company's opportunity in the expanding cloud data services market.
In other recent news, Snowflake Inc. reported strong third-quarter results, showcasing a 29% year-over-year increase in product revenue, reaching $900 million. The company's remaining performance obligations also saw a significant 55% year-over-year acceleration, totaling $5.7 billion. Snowflake's non-GAAP operating margin improved to 6%, leading the company to raise its full-year product revenue guidance to approximately $3.43 billion.
Needham, DA Davidson, and Goldman Sachs have all recently increased Snowflake's price target, maintaining a Buy rating, while BTIG maintains a Neutral stance. Evercore ISI raised the price target to $190 from $170, maintaining an Outperform rating. These adjustments come in the wake of Snowflake's robust performance and the anticipation of continued growth.
InvestingPro Insights
Snowflake's strong performance and positive outlook, as highlighted in the article, are reflected in some of the real-time data from InvestingPro. The company's revenue growth remains robust, with a 31.21% increase over the last twelve months, aligning with the upward revision in product revenue guidance mentioned in the earnings report.
InvestingPro Tips reveal that Snowflake "holds more cash than debt on its balance sheet," which could provide financial flexibility to support its growth initiatives and competitive displacements noted by management. Additionally, analysts predict that "the company will be profitable this year," potentially marking a significant milestone for Snowflake as it continues to expand its market presence.
However, investors should note that Snowflake is currently "trading at a high revenue valuation multiple," which may reflect the market's optimism about its growth prospects but also suggests a premium valuation. The company's Price / Book ratio of 10.48 further underscores this high valuation.
For those interested in a deeper analysis, InvestingPro offers 5 additional tips that could provide further insights into Snowflake's financial health and market position.
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