Snowflake (SNOW) Stock Pops on New $200 Price Target

  • Jefferies analyst Brent Thill upgraded shares of Snowflake (SNOW) to “buy,” drawing interest on Wall Street.
  • Thill gave a resounding endorsement of SNOW stock, mentioning “rock solid” fundamentals and a high-acumen management team.
  • Though shares have faded somewhat during the late morning hours, the longer-term narrative involving cloud-based data warehousing could be compelling.
SNOW stock - Snowflake (SNOW) Stock Pops on New $200 Price Target

Source: Sundry Photography / Shutterstock

Following a rough year for most technology-centric companies, shares of Snowflake (NYSE:SNOW) — a cloud-computing-based data warehousing firm — initially popped higher on the opening bell thanks to an analyst upgrade. Jefferies’ Brent Thill sparked optimism in SNOW stock, upgrading it to a “buy” from “hold.” Additionally, he upgraded his target price to $200 from $125.

In a research note, Thill wrote, “Fundamentals remain rock solid and the execution has been near flawless over many consecutive quarters, spearheaded by an all-star management team with a proven track record of scaling software businesses.” Specifically, the analyst believes that Snowflake offers similarities to the “best-in-class software platform stories,” which includes Salesforce (NYSE:CRM).

Thill isn’t the lone wolf in his endorsement of SNOW stock. Earlier, analysts from JPMorgan Chase and Canaccord Genuity promoted similar theses. For instance, the former institution’s Mark Murphy raised his rating to “overweight” from “neutral.” The analyst cited substantial competencies in Snowflake’s executive leadership team.

SNOW Stock Compares Favorably to Rivals

A key theme among Wall Street analysts’ upgrades for SNOW stock involves favorable competitive profiles. As Thill mentioned, Snowflake trades at a valuation of 16 times enterprise value against 2023 revenue estimates, which are up 54%. While rivals Datadog (NASDAQ:DDOG) and Zscaler (NASDAQ:ZS) feature the same multiples, the analyst noted that they both are tied to a lower growth rate.

Considering that SNOW stock has hemorrhaged roughly 56% on a year-to-date basis, the underlying company’s strong fundamentals offer a viable discounted opportunity. In addition, the data warehousing sector should grow in relevance.

According to Herzing University, data warehousing has become an important tool in business intelligence platforms as it facilitates a uniform format to all collected data. Furthermore, the innovation “improves the speed and efficiency of accessing different data sets and makes it easier for corporate decision-makers to derive insights that will guide the business and marketing strategies that set them apart from their competitors.”

Temporary Setback

While SNOW stock did pop higher at the start of the June 28 session, heading into the afternoon session, it slipped noticeably, down about 1.5% at the time of writing. Weaknesses in the cloud-computing sector may have dragged Snowflake down.

Nevertheless, investors will want to recognize the bigger picture. According to Fortune Business Insights, the global cloud-storage market could hit $376.37 billion in 2029, representing a compound annual growth rate (CAGR) of 24% from 2022.

More than likely, the quality players will garner the lion’s share of this burgeoning market. That’s really the takeaway for the analyst upgrade of SNOW stock.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC