On Thursday, Scotiabank adjusted its outlook on Snowflake Inc . (NYSE: NYSE:SNOW), reducing the stock's price target to $165 from $195 while sustaining a Sector Outperform rating. The adjustment came after the company's second-quarter product revenue slightly surpassed expectations, and it raised its top-line forecast for fiscal year 2025. However, Snowflake did not increase its free cash flow (FCF) margin guidance for the same period, which led to a decline in share prices in after-hours trading.
Market observers are speculating whether recent data breaches or the adoption of open table formats like Iceberg Tables might have influenced Snowflake's modest overperformance in the quarter. Despite these concerns, Scotiabank remains optimistic about the company's prospects. The analyst noted that recent checks suggest minimal impact on Snowflake from the credential theft incident and that the adoption of Iceberg Tables is not a priority for most Chief Information Officers (CIOs) in 2024.
The firm also sees potential for Snowflake to benefit from developments in artificial intelligence (AI). While acknowledging the complexity of the current situation, Scotiabank expressed confidence in Snowflake's performance in the third and fourth quarters of fiscal year 2025. The analyst pointed out that with the stock's significant underperformance recently, the risk/reward balance appears to be tilted favorably for investors, prompting the reiteration of the Sector Outperform rating.
Snowflake, a cloud-based data warehousing company, has been under scrutiny after the market's reaction to its financial updates. The company's shares have experienced volatility following the latest fiscal reports and industry developments.
In other recent news, Snowflake Inc. reported substantial developments in its financial performance. The company's second-quarter results showcased a 30% growth in product revenue, reaching $829 million, leading to an upward revision of its fiscal year 2025 product revenue guidance to $3.356 billion. Despite these positive results, the company experienced a deceleration in revenue growth.
Several analyst firms have made adjustments in their outlook for Snowflake. TD Cowen maintained a Buy rating and a price target of $180, emphasizing the significance of the full-year guidance raise. Rosenblatt adjusted the price target to $180 from the previous $195 while maintaining a Buy rating. Piper Sandler reiterated an Overweight rating and a price target of $165. Baird maintained an Outperform rating but reduced its price target to $152 from $165.
The company also reported a significant increase in its remaining performance obligations (RPO), which climbed to $5.2 billion, a 48% rise. The company's recent developments, highlighted by robust product revenue and RPO growth, have been key factors in maintaining the positive outlook among most analyst firms.
InvestingPro Insights
As Snowflake Inc. navigates a dynamic market landscape, real-time data from InvestingPro provides a nuanced picture of the company's financial health and stock performance. With a market capitalization of $45.22 billion, Snowflake's valuation reflects its position in the cloud data warehousing sector. Notably, the company holds more cash than debt, which, coupled with liquid assets that exceed short-term obligations, suggests a strong balance sheet. However, it's important to note that Snowflake is not currently profitable, with a negative P/E ratio of -47.96, and it trades at a high revenue valuation multiple of 9.92 times the book value.
Despite the lack of profitability over the last twelve months, analysts are optimistic, predicting that Snowflake will turn profitable this year. This optimism may be buoyed by the company's robust revenue growth of 32.85% in the last twelve months as of Q1 2023. However, the stock has taken a significant hit over the last six months, with a price total return of -40.14%, reflecting investor sentiment and market conditions. It's also worth noting that Snowflake does not pay a dividend, which could be a factor for income-focused investors.
For those seeking a deeper dive into Snowflake's performance and future outlook, InvestingPro offers additional insights and tips. Currently, there are seven more InvestingPro Tips available, providing valuable information for investors considering Snowflake as part of their portfolio. To explore these further, visit the dedicated section at https://www.investing.com/pro/SNOW.
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