Snowflake NEW YORK: SNOW Shares have hovered near long-term lows for years as concerns about slowing growth and financial health weighed on sentiment, but times have changed. The third quarter’s results show sustained strength, customer growth and strong service penetration, demonstrating the company’s industry-leading position in data management and its value to investors. This news includes significant increases in all metrics, which provide increased net income and significantly improve the financial outlook. The company will face headwinds as it grows and scales its business, but it is well positioned to do so and the share price now has analyst support.
Snowflake today
(As of 5:24 p.m. ET)
- 52 week range
- $107.13
▼
$237.72
- Target price
- US$180.23
Analyst reaction to the third-quarter results was overwhelmingly optimistic, with more than a dozen companies raising their price targets. The target price increase is significant; most are in double digits, with many in the 20% to 30% range, and the consensus target is strengthening. Consensus suggests fair value is around $170, but the revision trend that has reversed the downtrend suggests a move into the $190 to $200 range is likely, and that’s a low forecast. The company’s forecasts assume business trends will continue, leaving room for outperformance and strong guidance into 2025.
Snowflake’s business is rapidly gaining momentum through acquisitions and penetration
Snowflake had a strong quarter, maintaining its strong growth rate of 20% in the third quarter and beating consensus estimates. Revenue of $940.09 million rose 28.3% year-over-year and beat MarketBeat’s consensus estimates by nearly 500 basis points for customer acquisition and penetration. The company’s largest customer group grew by 25%, and its system-wide net retention rate was an impressive 127%. The net retention rate is down from last year, but due to the law of large numbers, the dollar contribution is larger and is expected to continue to grow with new customers. Remaining performance obligations, an indicator of future revenue growth, grew 55%, equivalent to six quarters of business at the pace of the third quarter.
Snowflake Stock Forecast Today
US$180.23
Growth potential 7.64%Moderate purchase
Based on ratings from 38 analysts
| High forecast | $223.00 |
|---|---|
| Average forecast | US$180.23 |
| Low forecast | $121.00 |
Snowflake Reserve Forecast Details
Margin news is mixed but positive for investors. The company experienced a decline in profitability, but it was less than expected and not enough to generate an adjusted loss or negative cash flow. The company’s gross profit decreased 290 basis points and GAAP losses widened due to higher marketing, research and development, and selling and administrative expenses to drive and support growth. More importantly, adjusted earnings are positive and 3,500 basis points above analysts’ forecasts, resulting in a positive quarterly cash flow.
The outlook also favors higher stock prices, with fourth-quarter and full-year revenue and profitability expected to exceed expectations. The company expects product revenue to grow about 1% sequentially and 23% year-over-year, which is a conservative estimate given its third-quarter results and customer performance.
The Anthropic Agreement will drive growth in 2025
Among the catalysts for Snowflake’s breakup is a new agreement with Anthropic. The deal will enable businesses and enterprises to enhance their AI applications on the Snowflake platform, which provides a unified data solution including storage, processing and analysis. Anthropic is expected to hit $1 billion in annual revenue this year, so this is a significant opportunity for Snowflake.
Snowflake’s price action rose more than 30% on the third-quarter news, confirming support at the lower end of its trading range along with rising trading volume. Trading volume is more than double its 30-day average, suggesting the move has legs. The critical resistance target is located near the midpoint of the range, which can be reached in the near future, which corresponds to the upper limit of the analysts’ target range. The transition to the $200 level could happen before the end of 2024; a move above $200 would be bullish for the market and would likely take the stock price to the top end of the range around $245.
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