On Thursday, Deutsche Bank (ETR:DBKGn) maintained its Buy rating on Snowflake Inc . (NYSE: NYSE:SNOW) but reduced its price target to $180 from $220. The adjustment follows Snowflake's second-quarter results, which indicated some stabilization in consumption and solid bookings, yet the revenue beat was not as substantial as required to significantly boost the stock's performance.
The company's management has increased the full-year Product revenue guidance to a 26% year-over-year growth, which is more than double the second-quarter beat. This growth rate is considered one of the highest among public software companies.
Deutsche Bank pointed out that approximately 25% of Snowflake's accounts are using its AI capabilities on a weekly basis, showcasing early positive signs of new product adoption.
The bank's analysis suggests that investor concerns may persist regarding the translation of new features and AI investments into consumption revenue. More concrete evidence may be needed to alleviate worries that Snowflake could be impacted by the rapid innovation in the data and AI sector.
Despite these concerns, Deutsche Bank remains optimistic about Snowflake's long-term prospects. The firm believes that Snowflake operates in a vast market with ample growth opportunities and that there can be multiple significant winners in this space.
The company's strengths, such as its multi-cloud capabilities, ease of use, extensibility, and network effects, are seen as solid foundations for sustained success.
The revised price target of $180 is based on updated guidance and forecasts, which implies a 14 times the calendar year 2025 revenue multiple. This new target reflects Deutsche Bank's continued confidence in Snowflake's market position and potential for growth.
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