On Thursday, Oppenheimer maintained its Outperform rating on shares of Snowflake Inc . (NYSE: NYSE:SNOW) but lowered the price target to $180 from $220.
The firm anticipates a slight outperformance for Snowflake's upcoming July-quarter report, with product revenue expected to surpass the guidance range of $805-810 million and the consensus estimate of $813 million. This represents a year-over-year growth of 26% at the midpoint, compared to the 34% growth in the previous quarter.
The company is predicted to reconfirm its annual product revenue forecast of $3.3 billion, which would be a 24% increase from the previous year. Despite a challenging macroeconomic climate, the firm believes that Snowflake will benefit from improved consumption trends and the easing of cloud optimization challenges.
The firm also highlights Snowflake's robust Remaining Performance Obligations (RPO) of $5.0 billion from the last quarter, marking a 46% year-over-year increase, fueled by significant growth in large customer accounts.
Snowflake's Net Revenue Retention (NRR) is expected to align more closely with product revenue growth, maintaining a rate above 125%. Still, this is still considerably lower than the peak of 178% seen in the January 2022 quarter.
The firm is particularly interested in Snowflake's expanding AI product offerings, such as Snowpark Container Services, Cortex, Artic, Document AI, and others. These products are deemed essential for the company to succeed as a comprehensive data and AI platform.
The report suggests that Snowflake's revenue growth could accelerate in FY25 (CY24) and beyond, driven by new products including Unistore, Dynamic Tables, and Iceberg Tables. Despite the price target reduction, which reflects a broader compression in market multiples, the firm expects Snowflake's stock to rebound. It views the current market concerns over budget constraints and competition from rivals like Databricks as overstated.
In other recent news, Snowflake Inc. announced the departure of Grzegorz Czajkowski, Executive Vice President of Engineering and Support, who is leaving to pursue another opportunity. As the company searches for a replacement, Co-Founder Thierry Cruanes will oversee the engineering and support teams. This comes amid the company's ongoing expansion in the prepackaged software industry.
Analysts have been closely monitoring these developments. UBS maintains a neutral stance on Snowflake, citing increasing competition from Databricks in the data analytics sector.
BofA Securities also holds a neutral position, despite recent security concerns, believing that the financial impact from potential refunds will be minimal. Goldman Sachs maintains a buy rating, highlighting Snowflake's potential in the Generation AI space and its focus on product innovation.
Snowflake has been actively addressing security concerns and making strides in the data cloud market. The company has launched a suite of new AI development tools and announced the launch of Polaris (NYSE:PII) Catalog, an open catalog for Apache Iceberg, underscoring its commitment to innovation. These recent developments reflect the company's strategic positioning within the data cloud market and its commitment to addressing customer needs and market trends.
InvestingPro Insights
As Snowflake Inc. (NYSE: SNOW) anticipates its upcoming financial report, insights from InvestingPro suggest a mixed financial health and market sentiment. With a market capitalization of $45.24 billion, the company's significant cash reserves are a testament to its financial stability, as highlighted by two InvestingPro Tips indicating that Snowflake holds more cash than debt and has liquid assets exceeding its short-term obligations. This could provide the company with the flexibility to navigate the challenging macroeconomic climate mentioned by Oppenheimer.
Despite not being profitable over the last twelve months, analysts remain optimistic, predicting profitability within the year. While the stock has seen a considerable downturn over the last six months, with a 27.6% drop in price, Snowflake's revenue growth remains strong at 32.85% over the last twelve months as of Q1 2025. This aligns with Oppenheimer's expectations of robust year-over-year growth.
Investors should note the high Price / Book multiple of 9.93, reflecting a premium valuation for Snowflake's assets. The company's strategic expansion into AI product offerings could play a crucial role in justifying this valuation if these initiatives translate into sustained growth and market share gains. For those considering an investment in Snowflake, using the promo code PRONEWS24 can provide up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro, where additional tips (6 more available) and in-depth analysis are offered to guide your investment decisions.
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