On Thursday, TD Cowen maintained its Buy rating on Snowflake Inc . (NYSE: NYSE:SNOW) and increased the price target to $190 from $180. The adjustment follows Snowflake's reported third-quarter results, which showcased a robust product growth of 29%, surpassing the Street's expectation of 22%. The company also raised its implied fourth-quarter guidance by 3%, exceeding the expectations of the buy-side and resulting in an approximate 20% surge in after-hours trading.
TD Cowen attributes the positive momentum to several factors that are influencing Snowflake's performance. Notably, the company's go-to-market (GTM) strategy modifications are contributing to stabilizing consumption growth. Moreover, a product named Iceberg is delivering net benefits, and the firm's early ventures into artificial intelligence (AI) are showing promising beginnings. These developments are anticipated to propel ongoing favorable trends into the next year.
The analyst's commentary highlighted the key drivers behind the optimistic outlook for Snowflake. The company's third-quarter success was linked to strategic GTM changes that have been instrumental in supporting growth. Additionally, the introduction of Iceberg and the early traction gained by the company's AI initiatives are seen as positive indicators for future performance.
The raised price target reflects the analyst's confidence in Snowflake's continued growth and its ability to capitalize on the constructive trends identified. With the Buy rating reaffirmed, the new price target of $190 suggests a favorable view of the company's prospects.
TD Cowen's updated assessment of Snowflake's stock comes after the company's recent third-quarter earnings report, which has evidently strengthened investor confidence. The raised guidance for the fourth quarter and the stock's significant after-hours performance further underscore the company's strong standing in the market.
In other recent news, Snowflake Inc. has displayed a strong financial performance with its third-quarter product revenue increasing by 29% year over year to $900 million. The company's remaining performance obligations also experienced a significant 55% year-over-year increase, totaling $5.7 billion.
This performance has led to several firms adjusting their outlook on Snowflake. Piper Sandler increased its price target to $185, highlighting the company's solid execution and a stable macroeconomic environment. RBC Capital Markets and DA Davidson raised their price targets to $188 and $200 respectively, while Goldman Sachs (NYSE:GS) maintained a $220 price target.
Snowflake's recent product cycle and the increased adoption of data engineering features were noted by analysts as factors that could support over 20% product revenue growth into the next year. The company also recently acquired DataVolo to enhance its data connectivity and engineering capabilities and formed a partnership with Anthropic to integrate powerful AI models into the Snowflake Cortex.
However, while some firms have a positive outlook on Snowflake, others like BTIG have maintained a neutral stance, seeking more evidence of momentum with new product initiatives.
InvestingPro Insights
To complement TD Cowen's bullish outlook on Snowflake, InvestingPro data provides additional context for investors. Despite the company's strong product growth and raised guidance, InvestingPro Tips reveal that Snowflake is "Not profitable over the last twelve months" and is "Trading at a high revenue valuation multiple." This suggests that while growth prospects are promising, the company is still in an expansion phase with profitability yet to be achieved.
The company's financial health appears solid, as an InvestingPro Tip notes that Snowflake "Holds more cash than debt on its balance sheet." This strong cash position could support ongoing investments in growth initiatives, including the AI ventures mentioned in the article.
InvestingPro data shows Snowflake's revenue for the last twelve months stands at $3,206.4 million, with a robust revenue growth of 31.21%. This aligns with the article's mention of the company's strong product growth and surpassing Street expectations.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Snowflake, providing a deeper understanding of the company's financial position and market valuation.
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