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Down 17% in 1 Month, Snowflake Stock (NYSE: SNOW) is Under Pressure. Price Targets Still Leave Plenty Of Upside Potential

Analyst Team trader
Updated 26 Jun 2024

Snowflake stock (NYSE: SNOW) has been coming under increasing pressure in recent months, with the most recent accounting for a 17% drop in share price. The leading cloud-based data warehousing company has experienced a significant drop in sentiment from recent highs, declining by 48% from its 52-week high.

This downward trend has been attributed to various factors, including changes in management, heightened competition in the industry, security breaches of systems, and sub-par quarterly financial performance. But despite the shift in sentiment, underneath in the detail might be a few silver linings.

Analysts have revised down their own Snowflake price targets in recent weeks, but taking the revised numbers still leaves plenty of positive upside potential. Wells Fargo lowered their bullish target from a mark of $260 down to $200 most recently. When considering the last closing price of SNOW of $124, there remains almost 40% upside if Wells are near the mark.

Despite the downturn in price action, Snowflake's recent financial results paint a more optimistic picture for the future. The company has reported a robust 34% year-over-year growth in product revenue, reaching $790 million for the fiscal first quarter of 2025. These figures exceeded market expectations, allowing the company to raise its full-year product revenue forecast to $3.30 billion.

One of Snowflake's key advantages is its sizable total addressable market (TAM), which is expected to expand significantly—an increase from $152 billion in 2023 to an impressive $342 billion by 2028. This growth is anticipated to be mainly driven by opportunities in artificial intelligence (AI).

To effectively capitalise on these AI-driven opportunities, Snowflake has introduced innovative products such as Cortex AI, Document AI, and Snowflake Copilot. These products are designed to enhance the capabilities of the AI-driven data cloud market, thus potentially boosting customer spending and loyalty.

The company's customer base continues to expand, with a 21% increase in the number of customers, totalling 9,822 by the end of fiscal Q1. Notably, 485 of these customers generate over $1 million in annual product revenue, indicating the high value placed on Snowflake's services by substantial enterprise customers.


However, it’s not all rosy for Snowflake, as the company reported a slight decrease in its non-GAAP product gross margin, down to 76.9%. Consequently, Snowflake has revised its full-year margin forecast down to about 75%.

Looking at earnings expectations, analysts have projected that Snowflake's adjusted earnings will decrease to $0.62 per share in fiscal 2025 but will recover to $0.99 per share in the subsequent fiscal year.

In terms of valuation, Snowflake currently trades at a price-to-sales ratio of 14, which is significantly lower than the multiple of 25 seen at the end of 2023. This suggests that the company's stock may now present a more attractive investment opportunity.

The sentiment among analysts remains largely positive, with 71% of those covering Snowflake recommending it as a buy. The median 12-month price target for Snowflake shares stands at $200, suggesting a potential 60% increase from the current price level.

Although Snowflake faces certain challenges in the near term, which are reflected in its reduced stock price, the company's innovative product offerings, growing customer base, and expanding TAM present significant growth opportunities. Investors considering Snowflake might see the current lower stock price as a more approachable entry point, keeping in mind its promising prospects for the future.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.