On Thursday, Snowflake Inc . (NYSE: NYSE:SNOW) saw its shares price target increased by Needham from $160.00 to $200.00, while the firm maintained a Buy rating on the stock. This adjustment comes in the wake of Snowflake's recent earnings report, which showcased a solid performance, prompting Needham to revise its estimates and price target upward with greater confidence in the company's prospects.
The report highlighted Snowflake's robust growth in remaining performance obligations (RPO) and current RPO (cRPO), with cRPO growth marking the largest sequential dollar increase in recent years. This surge was attributed to Snowflake's effective execution during the renewal cycle, which included securing three contracts each worth over $50 million in total contract value (TCV).
Snowflake's success with large orders is expected to continue into the fourth quarter of fiscal year 2025. The company has two Top 10 customers, each with an annual run-rate between $40 million and $50 million, who are presently on monthly agreements. These contracts are set to expire at the end of the year, and both customers have a history of multi-year commitments.
Needham's optimistic outlook for Snowflake is based on these factors, which demonstrate the company's capacity to close significant deals and the potential for continued large order intake in the near future. The firm's raised price target reflects this positive assessment of Snowflake's business trajectory and financial health.
In other recent news, Snowflake Inc. reported strong fiscal third-quarter results, with product revenue reaching $900 million, marking a 29% year-over-year increase. The company also saw a significant 55% year-over-year acceleration in remaining performance obligations, totaling $5.7 billion. Furthermore, Snowflake's non-GAAP operating margin improved to 6%, leading the company to raise its full-year product revenue guidance to approximately $3.43 billion.
Analysts from various firms have provided their insights on Snowflake's performance. DA Davidson increased Snowflake's price target from $175.00 to $200.00, maintaining a Buy rating.
Goldman Sachs (NYSE:GS) maintained its Conviction Buy rating, while Evercore ISI raised the price target to $190 from the previous $170, maintaining an Outperform rating. BTIG, on the other hand, maintained a Neutral stance, seeking more evidence of stabilization and momentum with new product initiatives.
Among recent developments, Snowflake acquired DataVolo to enhance data connectivity and engineering capabilities and formed a partnership with Anthropic to integrate powerful AI models into the Snowflake Cortex. These advancements, coupled with the company's robust financial performance, are expected to continue driving Snowflake's growth in the data management and analytics sector.
InvestingPro Insights
Snowflake's recent performance and Needham's optimistic outlook are supported by several key financial metrics and insights from InvestingPro. The company's revenue growth remains strong, with a 31.21% increase over the last twelve months, reaching $3.21 billion. This aligns with the robust growth in remaining performance obligations highlighted in the article.
Despite the impressive top-line growth, InvestingPro Tips reveal that Snowflake is not yet profitable over the last twelve months, with a negative P/E ratio of -41.7. However, analysts predict the company will turn profitable this year, which could be a significant catalyst for the stock.
Snowflake's balance sheet strength is noteworthy, as it holds more cash than debt. This financial flexibility could support the company's ability to secure and fulfill large contracts, as mentioned in the article regarding the $50 million TCV deals.
For investors considering Snowflake, it's important to note that the stock is trading at a high revenue valuation multiple, reflecting the market's growth expectations. The Price to Book ratio of 10.48 further underscores this premium valuation.
InvestingPro offers additional tips for a more comprehensive analysis of Snowflake's financial position and market performance. Investors can access 7 more tips by visiting InvestingPro.
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