After the software company’s latest earnings reports outperformed analysts’ estimates and presented a stronger-than-expected outlook for the fiscal year, shares of Snowflake Inc. had their highest performance in a year.
The stock rose 15.9% on Thursday trading, marking its biggest single-day gain since December 3, 2020, when it rose 16.1%. The company’s revenue more than doubled in the most recent quarter, sending a positive signal to analysts about its future pipeline.
Snowflake’s strong earnings prompted Citi Research analyst Tyler Radke to upgrade the stock from neutral to buy. He cited the company’s largest product sales beat-and-raise since its IPO, as well as the fact that it exceeded his profitability target considerably ahead of schedule. Radke raised his price target from $299 to $470, and several other analysts also raised theirs.
“Large transaction activity appears to be gathering up steam, and international markets are gaining traction,” Mizuho analyst Gregg Moskowitz noted. “More broadly, we believe SNOW’s services are now much ahead of the competition.”
Snowflake’s management team stated that the firm experienced a “breakout quarter” for bookings and consumption; however, some of the company’s outperformance stemmed from stronger-than-expected use by Snowflake’s largest clients. Overall, Moskowitz praised Snowflake’s achievements, calling them “phenomenal.”
“We continue to believe we’re in the early stages of a tremendous trend in which organisations will substantially standardise on SNOW’s platform,” he said, maintaining his buy rating and $450 price target.
Kirk Materne of Evercore ISI was bullish about Snowflake’s reacceleration in product revenue growth during the company’s “monster quarter.”
“While the stronger-than-expected beat was driven by strong consumption from some of SNOW’s larger customers,” he wrote. “The upbeat guide for F4Q product revenue (+94-96 percent) helps illustrate that the business’s trends are durable and why Snowflake remains one of the truly unique hyper-growth stories in software.”
If the macroeconomic backdrop remains “dynamic,” Snowflake “will not be immune to future market gyrations,” Materne noted, but he likes the company’s long-term potential. He upgraded the stock to outperform and raised the price target to $400 from $380.
One of the highlights for Ittai Kidron of Oppenheimer was Snowflake’s first quarter of positive adjusted earnings, with a more than 170 percent net revenue retention rate.
In a note to clients, he reiterated his outperform rating and raised his target price to $400 from $360. He cited “a long trajectory of rapid revenue increases for the next few years fueled by a [information technology] shift to a cloud-centric model, digital transformation, and higher spend on [machine learning]/data science.”
Kash Rangan of Goldman Sachs kept his Buy rating and boosted the price target from $340 to $390. (25.4 percent upside).
