On Thursday, Jefferies, a financial services company, adjusted its outlook on Snowflake Inc . (NYSE: NYSE:SNOW) shares, reducing the price target to $145 from the previous $160, while continuing to endorse the stock with a Buy rating. The adjustment reflects a more conservative valuation amid the company's ongoing changes and investments.
The firm's analysis recognized Snowflake's solid financial performance, noting a revenue beat of approximately 3% and an increase in the full-year revenue forecast that more than doubles the size of the beat. Furthermore, the company's remaining performance obligations (RPO) showed an acceleration, growing 48% year-over-year.
Jefferies highlighted that Snowflake is in a pivotal transition year, marked by significant product investments, go-to-market strategy adjustments, and leadership changes.
The firm expressed confidence in the new CEO's ability to drive progress, anticipating that these developments will lead to higher margins in the future.
Despite the positive outlook on the company's operational progress, valuation concerns persist. Jefferies pointed out that the stock's valuation could see downside risks, potentially dropping to a range between $95 and $110, which would represent 7 to 8 times the estimated revenue.
In summary, while Jefferies has reduced Snowflake's price target to $145, the firm maintains a Buy rating, basing the target on an 11 times multiple of the projected fiscal year 2026 revenue.
The report underscores the company's solid recent performance and the expectation of continued improvement in margins, balanced by a cautious stance on the company's valuation in the near term.
In other recent news, Snowflake Inc. reported a significant rise in its product revenue, reaching $829 million, a 29.5% increase year over year, surpassing market expectations.
This robust performance led to an upward revision of the fiscal year 2025 product revenue guidance to $3.356 billion, a 26% increase year over year. Despite these positive results, BTIG maintained a Neutral rating on Snowflake's stock due to competitive pressures.
Analyst firms have made several adjustments in their outlook on Snowflake. Evercore ISI maintained an Outperform rating, while DA Davidson and Loop Capital both lowered their price targets but kept a Buy rating.
Baird adjusted its price target for Snowflake shares, citing weaker initial guidance and leadership transition, but maintained an Outperform rating. Citi likewise, lowered its price target for Snowflake shares while maintaining a Buy rating.
Snowflake's management expressed confidence in the current steady consumption trends, which supported an increase in the fiscal third-quarter guidance.
The company's future growth is backed by its substantial growth in remaining performance obligations (RPO), which climbed to $5.2 billion, a 48% rise.
This was partly attributed to Snowflake securing two significant nine-figure deals within the quarter. These are the recent developments in Snowflake's financial performance and market expectations.
InvestingPro Insights
As Snowflake Inc. navigates through its year of transition, real-time data from InvestingPro offers additional perspectives on the company's financial health and market performance. InvestingPro Data shows Snowflake's market capitalization stands at $45.22 billion, reflecting the scale of the company within the tech sector. Despite not being profitable over the last twelve months, the company reported a substantial revenue growth of 32.85% in the same period, indicating strong sales performance.
InvestingPro Tips highlight that Snowflake holds more cash than debt on its balance sheet and has liquid assets that exceed short-term obligations, suggesting a solid liquidity position. However, the company is trading at a high revenue valuation multiple and a high Price/Book multiple of 9.92, aligning with Jefferies' concerns about valuation. Notably, Snowflake's stock has taken a significant hit over the last six months, with a price total return of -40.14%, which may attract investors looking for a potential rebound.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, which provide further insights into Snowflake's financial metrics and market prospects. These tips can be accessed through the InvestingPro platform for those who are considering Snowflake as part of their investment strategy.
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