On Thursday, Evercore ISI maintained its Outperform rating on Snowflake Inc . (NYSE: NYSE:SNOW), with a steady price target of $225.00. The firm's evaluation comes amidst discussions about the company's revenue and remaining performance obligations (RPO) potentially balancing out some of the increased operational margin pressures anticipated in the fiscal year 2025 guidance.
The analysis by Evercore ISI highlights that, despite concerns regarding costs, particularly the return on GPU investments, and potential second-half challenges due to Iceberg and data warehouse optimization, the fundamental business of Snowflake remains robust. The firm emphasizes that Snowflake is in the early stages of realizing the benefits from its newer services, such as Cortex and Snowpark, which are expected to drive consumption.
As Snowflake approaches its analyst meeting in early June, Evercore ISI suggests that the risk/reward outlook appears favorable for the second half of the year. The firm anticipates that further insights into how the company's new AI services are influencing consumption will be a critical topic. Additionally, any information provided about Snowflake's long-term operating leverage is likely to be received positively by investors.
The analyst's commentary reflects confidence in Snowflake's core business and its trajectory, despite near-term headwinds. The focus is on the potential growth and efficiency gains from the company's investment in innovative services.
InvestingPro Insights
Evercore ISI's optimistic stance on Snowflake Inc. (NYSE: SNOW) is further complemented by notable financial metrics and professional insights. According to the latest data, Snowflake boasts a robust revenue growth rate of 35.86% for the last twelve months as of Q4 2024, underlining the company's expanding business. The firm's commitment to innovation and service expansion, as reflected in its gross profit margin of nearly 68%, suggests a strong ability to monetize its offerings effectively.
InvestingPro Tips indicate that Snowflake holds more cash than debt on its balance sheet and has liquid assets exceeding short-term obligations, which could provide financial flexibility in pursuing growth strategies or weathering operational margin pressures. However, it's also important to note that Snowflake is not profitable over the last twelve months and is trading at high revenue and Price/Book valuation multiples, which investors should consider in the context of their investment strategies.
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