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Snowflake Receives Cautious Support From Analysts

Analysts applaud Snowflake's fiscal fourth quarter results, but some express concerns about valuation.
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Analysts voiced guarded support for Snowflake's  (SNOW)  Thursday after the cloud-based data-storage and -management platform posted its fiscal fourth-quarter results on Wednesday after the close.

Shares of the San Mateo, Calif. company initially fell about 4.5% on Thursday morning but were rallying 3.8% to $256.35 at last check.

"We remain bullish on the long-term outlook of Snowflake given positive feedback in our industry checks," said Deutsch Bank analyst Patrick Colville, who upgraded the company to buy from hold. "We see Snowflake’s growth as suggestive of a very large TAM (Total Addressable Market) and a clear product market fit."

On Wednesday, Snowflake reported a wider fiscal-fourth-quarter net loss as revenue more than doubled. The revenue beat Wall Street's estimates while the adjusted loss met expectations.

Colville, who raised his price target to $300 from $270, said he had downgraded the company in Dec. 2020, "given uncertainty around Snowflake’s unusual three stage post-IPO lockup expiration, and a valuation that had gone from being at a discount to high-growth peers to a premium."

"In our view, the risk/reward now looks more favorable and we upgrade Snowflake to buy," Colville said.

Morgan Stanley also raised its price target on Snowflake, going to $270 from $265.

JPMorgan analyst Mark Murphy, who has a neutral rating on the stock with a $250 price target, said "Snowflake reported another solid quarter both in terms of consumption and new bookings levels."

"We expect Snowflake to continue to grow revenue at a rapid scale," Murphy said. "Despite our very favorable view of the technology and the company, our rating is neutral as we think the risk/reward is fairly balanced at the current price levels, marking the steepest valuation we can recall in the software industry in the last couple of decades."

Barclays analyst Raimo Lenschow lowered his price target on Snowflake to $270 from $295 while keeping an equal weight rating. 

"Strong customer additions, traction with Fortune 500 enterprises, and positive sentiment around renewals leave us confident that Snowflake will continue to exceed expectations," Lenschow said. "Valuation of about 45x CY22E sales remains the reservation for us and hence, we maintain our Equal Weight rating."

Goldman Sachs analyst Kash Rangan lowered his price target on Snowflake to $270 from $310, while reiterating a neutral rating on the shares. 

Rangan said in a research note that he continues to view Snowflake as well positioned to replace incumbent data warehousing solutions owing to its "scalable and elastic" cloud native platform, but believes this is largely reflected in the company's valuation.