On Thursday, Deutsche Bank (ETR:DBKGn) reiterated its Buy rating on shares of Snowflake Inc . (NYSE:SNOW), keeping the price target steady at $220.00. The firm's assessment acknowledges the past year's challenges for Snowflake, where its stock declined by 19% compared to a 25% increase in the IGV index, which tracks software-industry stocks.
The underperformance was attributed to heightened cloud optimization activities and a series of adjustments to the company's long-term growth expectations, including the withdrawal of its fiscal year 2029 targets.
The analyst from Deutsche Bank noted that despite the competitive and rapidly changing industry landscape, Snowflake's stock is now positioned to potentially outperform, based on the reset of consensus expectations and valuation.
The current valuation of Snowflake at approximately 11 times its calendar year 2025 revenue and 45 times its calendar year 2025 free cash flow is considered reasonable when compared to its peers in the high-growth Infrastructure & Security Software sector, which average around 12 times revenue and 61 times free cash flow.
The firm's confidence in Snowflake is partly due to the belief that the company's performance in fiscal year 2025 will likely mitigate risks for fiscal year 2026 projections. This solid foundation is expected to support the stock's upward movement, as the valuation no longer appears excessively demanding.
Snowflake's performance in the last couple of quarters has been a factor in the reassessment of its stock. Deutsche Bank's stance indicates that even if there is no significant improvement in the company's trends, the stock is still expected to perform well.
The reiterated Buy rating and $220 price target from Deutsche Bank reflects a positive outlook for Snowflake, suggesting that the current market conditions and company's valuation present an opportunity for the stock to ascend.
In other recent news, Snowflake Inc. announced the resignation of Grzegorz Czajkowski, Executive Vice President of Engineering and Support. The company is actively seeking a replacement while co-founder Thierry Cruanes oversees the engineering and support teams. This change in leadership coincides with Snowflake's ongoing expansion in the prepackaged software industry.
In the analyst realm, UBS maintains a neutral stance on Snowflake, citing increasing competition from Databricks. Goldman Sachs (NYSE:GS) maintains a buy rating, emphasizing Snowflake's potential in the Generation AI space. BofA Securities also holds a neutral position, despite recent security concerns, believing that the financial impact from potential refunds will be minimal.
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. These recent developments reflect Snowflake's commitment to innovation and strategic positioning within the data cloud market.
InvestingPro Insights
As Deutsche Bank maintains a bullish stance on Snowflake Inc. (NYSE:SNOW), investors may find additional context through real-time data and insights from InvestingPro. Snowflake's market capitalization stands at a robust $46.82 billion, indicating its significant presence in the market despite recent challenges.
The company's revenue growth remains strong, with a notable increase of 32.85% over the last twelve months as of Q1 2023. This growth trajectory underscores the company's ability to expand its operations effectively.
InvestingPro Tips highlight that Snowflake holds a stronger liquidity position, with cash reserves outweighing its debt and liquid assets covering short-term obligations. This financial health is crucial for enduring market fluctuations and pursuing growth opportunities. Moreover, while the company has not been profitable over the last twelve months and is trading at high revenue and book value multiples, analysts are optimistic about Snowflake turning a profit this year.
For investors seeking a deeper dive into Snowflake's potential, InvestingPro offers numerous tips, including those mentioned above, to inform investment decisions. Interested readers can unlock these insights and more by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, providing a comprehensive view of Snowflake's financial landscape.
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