On Friday, Citi maintained a Buy rating on Snowflake Inc . (NYSE: NYSE:SNOW) stock and increased its price target from $183.00 to $225.00. The adjustment follows what the firm describes as a "redemption quarter" for the cloud-based data-warehousing company, citing significant top-line performance and an acceleration in bookings.
Snowflake's recent quarter saw new product contributions and a consistent net revenue retention (NRR), which is a key metric for measuring customer satisfaction and future revenue potential. Citi's analysis highlighted the company's effective management and innovative strategies, particularly in areas of artificial intelligence (AI) and data engineering, which are expected to counterbalance challenges like Iceberg tables and usual optimization and storage headwinds.
The firm's confidence in Snowflake's future is further backed by the company's clear monetization strategy for its GenAI product. According to Citi, Snowflake's performance in the third quarter met expectations for clarity on this front. This positive outlook comes despite the stock's 25% decline from its January highs, suggesting a strong potential for recovery.
Citi's revised price target reflects a valuation of approximately 15 times the estimated calendar year 2026/fiscal year 2027 enterprise value to sales (Ev/Sales). The upgrade in the price target is a response to the company's robust quarterly results and a brighter projection for its financial trajectory in the coming years. Despite the stock's significant rise on Friday, Citi's stance remains firm on the Buy rating, with an emphasis on Snowflake's promising outlook for 2025 and beyond.
In other recent news, Snowflake Inc.'s impressive third fiscal quarter product revenue surpassed expectations by 5%, leading to an upward revision of the fourth fiscal quarter guidance. This was highlighted by KeyBanc Capital Markets, which increased their price target for Snowflake to $185. Monness Crespi Hardt also raised its price target to $188, reflecting confidence in the company's robust fourth-quarter outlook and full-year guidance.
Snowflake's recent performance was marked by significant achievements, including a 29% year-over-year increase in product revenue, reaching $900 million, and a 55% year-over-year growth in Remaining Performance Obligations (RPO), reaching $5.7 billion. The company's AI initiatives are gaining traction, with over 1,000 AI use-cases now in production and 3,200 customers utilizing Snowflake for AI and machine learning tasks.
Investment banking firms such as Jefferies, TD Cowen, and Piper Sandler also maintained positive ratings on Snowflake's shares while increasing their price targets. In addition to its robust financial performance, Snowflake recently acquired DataVolo to enhance its data connectivity and engineering capabilities and partnered with Anthropic to integrate powerful AI models into the Snowflake Cortex. However, firms like BTIG have maintained a neutral stance, seeking more evidence of momentum with new product initiatives.
InvestingPro Insights
Snowflake's recent performance aligns with several key insights from InvestingPro. The company's strong quarterly results and Citi's optimistic outlook are reflected in InvestingPro data, which shows a significant 48.35% price return over the past month and a 48.73% return over the last three months. These figures support Citi's view of a "redemption quarter" and the potential for recovery.
InvestingPro Tips highlight that 32 analysts have revised their earnings upwards for the upcoming period, reinforcing the positive sentiment expressed in Citi's analysis. Additionally, the tip noting that Snowflake holds more cash than debt on its balance sheet underscores the company's financial stability, which is crucial for funding innovation in AI and data engineering as mentioned in the article.
While the article focuses on Snowflake's growth potential, it's worth noting that InvestingPro data indicates a high revenue valuation multiple and a Price / Book multiple of 19.61. This suggests that investors are pricing in significant future growth, aligning with Citi's bullish stance and increased price target.
For readers seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Snowflake, providing a deeper understanding of the company's financial health and market position.
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