On Thursday, Loop Capital maintained a Buy rating on Snowflake Inc . (NYSE:SNOW) with a steady price target of $185.00. The firm acknowledged Snowflake's performance in the July quarter was satisfactory, yet slightly below some expectations.
Snowflake's product revenue exceeded forecasts by 2.6%, a minor shortfall against the anticipated 3-5% upside. The company's guidance for product revenue was positive and surpassed consensus but did not meet the higher expectations of some investors. This resulted in an 8% decline in Snowflake's shares in after-hours trading.
Snowflake reported a 29.5% year-over-year increase in product revenue, which was ahead of the expected 27%, and non-GAAP operating margins reached 5%, exceeding Loop Capital's estimate of 3%. The firm gained 27 Global 2000 customers during the quarter, an increase from 18 in the previous quarter. The financial services and technology sectors showed considerable strength, and the company continued to see stable cloud optimization trends.
The company's future looks promising with the forecast for FY25 product revenue set to more than double the F2Q beat. However, this optimistic outlook did not seem to sway the after-hours trading sentiment, with the stock experiencing an 8% drop. Loop Capital suggests that this dip could present a buying opportunity for investors looking to engage with what they consider an exceptional company at a potentially discounted price.
Loop Capital highlighted Snowflake's valuation, noting that it trades at 8x enterprise value/revenue for FY27/C2026, aligning with the average of its high-growth software peers. The firm's perspective remains that any potential decline in Snowflake's stock price during Thursday's trading session could be a strategic entry point for investors.
In other recent news, Snowflake Inc. has seen a flurry of activity following the release of its second-quarter results. The company reported a 30% growth in product revenue, hitting $829 million, leading to an upward revision of its fiscal year 2025 product revenue guidance to $3.356 billion. Despite this positive outcome, several analyst firms, including Scotiabank, TD Cowen, Rosenblatt, and Piper Sandler, adjusted their price targets for Snowflake while maintaining positive ratings.
KeyBanc reiterated an Overweight rating on Snowflake, highlighting the company's second-quarter product revenue that slightly exceeded expectations and the increase in the full-year 2025 product revenue guidance. TD Cowen maintained a Buy rating and a price target of $180, emphasizing the significance of the full-year guidance raise. Scotiabank adjusted its outlook on Snowflake, reducing the price target to $165 from $195 while sustaining a Sector Outperform rating, despite the company not increasing its free cash flow margin guidance.
The company's remaining performance obligations (RPO) also saw a significant increase, climbing to $5.2 billion, a 48% rise. Despite these positive developments, the provided commentary and the flat net new product revenue growth year-over-year might not fully address the concerns of long-term bears. However, the firm remains optimistic about Snowflake's pace of product innovation, particularly in artificial intelligence (AI).
InvestingPro Insights
As Snowflake Inc. navigates through market expectations and performance metrics, recent InvestingPro data provides a clearer picture for potential investors. The company's market capitalization stands at a robust $45.22 billion, reflecting a significant presence in the cloud computing industry. Despite not being profitable over the last twelve months, analysts are predicting profitability for Snowflake this year, signaling a potential turnaround in its financial trajectory. Moreover, Snowflake's liquid assets surpass short-term obligations, indicating a strong liquidity position that could support ongoing operations and investments.
However, the stock has faced challenges with a substantial 40.14% price decline over the last six months, which may concern some investors. Yet, this could align with Loop Capital's assessment that the current dip in share price may offer a buying opportunity. Additionally, Snowflake's revenue growth remains robust with a 32.85% increase over the last twelve months as of Q1 2023, showcasing the company's ability to expand its top-line figures steadily.
For those considering Snowflake as an investment, there are 7 additional InvestingPro Tips available, including insights on valuation multiples and dividend policies. These tips can be found on the InvestingPro platform, which offers an in-depth analysis to help investors make informed decisions. The current fair value estimations by analysts and InvestingPro stand at $175 and $135.17 respectively, providing a range for investors to consider when evaluating the company's stock price.
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