On Monday, RBC Capital Markets adjusted its outlook on Snowflake Inc . (NYSE: NYSE:SNOW) shares, reducing the price target to $220 from the previous $246, while continuing to endorse the stock with an Outperform rating. The adjustment reflects a more conservative valuation amid broader market shifts affecting peer group multiples.
The firm noted an optimistic view of the company's prospects in the upcoming quarter, with expectations for performance that could modestly exceed current estimates and guidance. The focus is on several key areas, including product revenue trends and insights from Snowflake's new CEO.
Additionally, the adoption of Snowpark and investments in Generative AI, particularly following the introduction of Arctic LLM, are of interest, especially in light of unconfirmed reports suggesting potential M&A activity in the Generative AI space.
RBC Capital expressed confidence that estimates for Snowflake could rise throughout the year, reinforcing a positive long-term outlook for the company.
Despite the reduced price target, the firm's stance remains firmly optimistic, anticipating upward movement in the company's financial projections.
The new price target of $220 represents a recalibration in response to the compression of multiples observed within Snowflake's peer group, a common occurrence in the dynamic tech sector.
The Outperform rating suggests that RBC Capital continues to view Snowflake as a stock likely to outperform the broader market or its sector in the foreseeable future.
InvestingPro Insights
InvestingPro data presents a mixed picture for Snowflake Inc. (NYSE: SNOW). The company's market capitalization stands at a robust $54.05 billion, reflecting significant investor interest. Despite this, Snowflake's Price/Earnings (P/E) ratio is currently negative at -63.85, underscoring the fact that the company has not been profitable over the last twelve months. However, the company's revenue growth remains strong, with a 35.86% increase over the last twelve months as of Q4 2024, indicating the potential for future profitability as analysts predict.
Two InvestingPro Tips highlight the company's financial health and market potential. Firstly, Snowflake holds more cash than debt on its balance sheet, which is a reassuring sign of financial stability. Secondly, the company's liquid assets exceed its short-term obligations, suggesting that Snowflake is in a good position to meet its immediate financial commitments. It's noteworthy that Snowflake does not pay a dividend to shareholders, which could be a factor for income-focused investors to consider.
For readers looking to delve deeper into Snowflake's financials and market prospects, InvestingPro offers additional tips that could guide investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are six more InvestingPro Tips available for Snowflake at https://www.investing.com/pro/SNOW, which could further inform your perspective on this evolving tech player.
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