Snowflake (NYSE:SNOW) is a manufacturer of cloud-based infrastructure that allows companies to virtually store data. Since the majority of organizations are working from home for a year, there is a surge in demand for cloud solutions offered by the company. This has had a direct impact on SNOW stock.
One of the most popular IPOs of 2020, SNOW stock more than doubled on its first day of trading as the market’s biggest software IPO. SNOW stock hit a high of $390 in December.
But the luster began to fade and the stock is currently down under $200. The price fell 30% so far in 2021.
I think the sell-off is a great opportunity to buy. I am bullish on the stock and believe it can hit new highs this year. Here’s why the stock should be on your watch list.
A Good Product With Strong Prospects
Snowflake has an exceptionally well-built product with a long runway. As remote work continues, the demand for a cloud platform will rise and Snowflake will have a huge opportunity to grow. What sets the platform apart from others is that customers only pay for whatever they use, rather than paying for services up front.
It is a win-win situation for both parties as each focuses on optimization of usage.
The product allows companies to store and analyze data in the cloud and this is something that all sizes and types of organizations need. There is ample data across different industries and businesses are always looking for products that keep their data secure and allow analysis. The cloud platform has an enormous opportunity to expand.
Based on its investor presentation, there is an $81 billion market for cloud services. Despite the competition, the company has some big names like Anthem (NYSE:ANTH), Caterpillar (NYSE:CAT) and Discover Financial Services (NYSE:DSF) using its cloud platform.
It is heavily investing in the business, which is the reason behind the lack of free cash flow. However, the company has managed to reduce the gap in free cash flow over the last two years.
The fundamentals are stellar. In the fourth quarter, the company generated a revenue of $190.5 million and the full-year revenue stood at $592 million. It was up by 123% and this is no small feat.
The company expects Q1 revenue to be about $195 million to $200 million. There is nothing that can slow the growth of the company in the coming years, which is a strong reason to add SNOW stock to your portfolio.
Wall Street Loves SNOW Stock
I am not the only one bullish on the stock. Wall Street loves it. Out of 19 analysts on TipRanks, 11 have a buy rating and eight have a hold rating with an average price target of $287.
The same is true with Seeking Alpha. Out of 27 analysts, nine are very bullish on the stock while two are bullish and 16 are neutral. They have an average price target of $288.12. Recently, Cowen analyst J. Derrick Wood had an “outperform” rating for the stock with a target price of $310.
Evercore ISI analyst Kirk Materne also had an outperform rating with a price target of $311. The analyst added that there are very few firms with a growth opportunity as large as Snowflake.
The Bottom Line
Snowflake is nowhere near the highs it can reach.
Investors have a positive approach towards the stock and I believe the company can scale and perform. With the growing demand for its services, the company will not find it difficult to add new clients to its portfolio.
With a market cap of $66 billion, the stock is priced for perfection. I believe it will hit $300 in the coming months. No matter the valuation the company holds, the stock is worth a buy. Snowflake has potential and it will deliver in 2021. The large market opportunity and strong fundamentals make it the best buy of the year.
Load up on the stock before it hits new highs.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.