SNOW - Snowflake pops as Scotiabank upgrades citing revenue product strength

2023-07-13 10:31:25 ET

Snowflake ( NYSE: SNOW ) shares rose nearly 5% on Thursday as investment firm Scotiabank upgraded the data warehousing giant, citing strength in both its revenues and upcoming products.

Analyst Patrick Colville raised his rating on Snowflake ( SNOW ) shares to sector outperform sector perform and boosted his per-share price target to $212 from $137, noting that fiscal 2024 revenue is "now firmly underwritten" and the company is likely to benefit from a product cycle in fiscal 2025 and 2026.

Colville also said the company's targets for fiscal 2029 - product revenue of $10B and free cash flow margins of 30% - "reflect scale and efficiencies as the business matures – which previously was not obvious."

"We quantitatively show that revised [fiscal 2024] expectations of +34% [year-over-year] product growth provide a good degree of conservatism," Colville wrote in a note, adding that commentary from management and the recent Databricks annual recurring revenue disclose "suggests that demand for pure-play analytics solutions is holding up."

Colville also said that Snowflake's ( SNOW ) Unistore, its unified platform, along with a large-language model assistant, its capabilities in data science and artificial intelligence, along with its recent public sector certification are "pivotal" for the company's next stage of success.

"We think these initiatives will expand the company’s opportunity to $102B in 2025, which Snowflake is ~5% penetrated," Colville added.

Analysts are mostly cautious on Snowflake ( SNOW ). It has a HOLD rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates SNOW a HOLD .

More on Snowflake

• As Snowflake, Databricks competition heats up, Oppenheimer sees 'multiple winners'
• Snowflake: Long-Term Moat Assessment
• Snowflake rises as it announces Nvidia partnership for generative AI apps

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