On Tuesday, TD Cowen maintained a Buy rating on Snowflake Inc . (NYSE: NYSE:SNOW) with a consistent stock price target of $230.00. The firm's outlook is positive due to several factors influencing the data cloud company's prospects. The upcoming earnings report on May 22 is anticipated after a CEO transition and a model reset in the last quarter of the previous fiscal year.
The firm believes that the financial year 2025 represents a conservative benchmark and expects first-quarter results to surpass expectations, along with a modest raise in the FY25 forecast.
TD Cowen's analysis indicates potential for growth stabilization based on partner feedback and an increase in sales headcount. Despite current weak investor sentiment, expectations for the first quarter are not considered excessively low. This presents a complex near-term situation, but the firm forecasts sentiment to strengthen in subsequent quarters.
The medium-term outlook for Snowflake is optimistic, with TD Cowen seeing opportunities for further growth in the company's business model. This growth is expected to be supported by the increasing adoption of Snowpark, Snowflake's developer framework, and the introduction of new Generation AI offerings, including Cortex and Container Services. These innovations are likely to contribute to the company's momentum in artificial intelligence.
The firm's commentary suggests that while the market's immediate view on Snowflake may be cautious, there are several drivers that could enhance the company's performance and investor perception in the near future. The emphasis is on the potential for Snowflake to exceed its growth model and capitalize on new product rollouts and market opportunities in artificial intelligence.
InvestingPro Insights
As Snowflake Inc. (NYSE: SNOW) approaches its earnings report on May 22, the latest data from InvestingPro shows a company with significant cash reserves and liquidity, as its cash position exceeds its debt, and liquid assets surpass short-term obligations. This financial stability may provide a cushion for the company's ambitious growth plans.
Still, it is important to note that Snowflake is currently not profitable, with a negative P/E ratio of -64.15 and an adjusted P/E ratio for the last twelve months as of Q4 2024 at -62.47. Despite this, analysts predict profitability within this year, which could be a turning point for the company.
InvestingPro data also highlights a robust revenue growth of 35.86% for the last twelve months as of Q4 2024, indicating that Snowflake's business is expanding at a healthy pace. The company's gross profit margin stands at 67.98%, a testament to its efficient operations.
Yet, this has not yet translated into positive operating income, with an adjusted operating income of -1094.77 million USD for the same period. The market has responded to these mixed signals, as reflected in the price movements: Snowflake's stock has seen a strong return over the last month with a 13.29% increase, yet it has fallen by 23.79% over the last three months.
For investors looking to delve deeper into Snowflake's financials and future prospects, there are additional InvestingPro Tips available. These tips can provide further insights into the company's valuation multiples, such as the high Price/Book multiple of 10.57, and its stock performance relative to market highs. Investors interested in these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to numerous additional tips that could inform investment decisions.
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