SNOW - Snowflake stock down 40% is an opportunity to buy: Goldman Sachs analyst

2024-07-01 11:34:42 ET

A 40% hit to Snowflake Inc (NYSE: SNOW) over the past four months is an opportunity to build a position at a discount, as per a Goldman Sachs analyst.

Shares of the data cloud company do not currently pay a dividend.

Snowflake stock could climb to $220

Kash Rangan added Snowflake stock to his “America’s Conviction List” on Monday. His $220 price objective suggests more than a 55% upside from here.

The analyst sees an “attractive entry point” in shares of the cloud-computing firm that he expects will benefit as data storage and analytics demand continues to surge in the coming months.

SNOW share price could benefit from the new artificial intelligence offerings including integration of AI chat capabilities to Cortex AI that its management announced at the Data Cloud Summit last month.

Confidence in new Snowflake CEO

Kash Rangan has confidence in the leadership of Sridhar Ramaswamy who joined Snowflake Inc as its chief executive in February of 2024. His research note told clients this morning:

New CEO’s strategy to accelerate product development will increase velocity and customer consumption which will culminate in fast top-line growth and high free cash margins that SNOW’s current valuation does not reflect.

Snowflake stock does also give you exposure to the AI market that Statista forecasts will hit a $1.0 trillion valuation within the next ten years.

Rangan’s constructive view on SNOW is widely shared. Wall Street has a consensus “overweight” rating on shares of the $46 billion company based out of Bozeman, Montana at writing.

SNOW expects a hit to operating margins

Also on Monday, Kingswood Wealth Advisors announced to have increased its stake in Snowflake Inc in the first quarter of 2024. The firm loaded up on 1,332 shares of the cloud-computing company for about $215,000 in Q1.

In May, the New York listed firm came in shy of earnings estimates for its first financial quarter and failed to impress the market with its guidance as well. Still, Sridhar Ramaswamy – the chief executive of SNOW said at the time:

Our core business is very strong. Our AI products are generating strong customer interest. They will help our customers deliver effective and efficient AI-powered experiences faster than ever.

Snowflake expects its product revenue to be in the range of $805 million to $810 million in its second fiscal quarter. Analysts, in comparison, were at $793 million. What did not sit well with investors, however, was the company’s outlook for operating margins that was trimmed on rising AI costs.

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