On Wednesday, Citi maintained its optimistic stance on Snowflake Inc . (NYSE: NYSE:SNOW), reiterating a "Buy" rating and a stock price target of $240.00. The firm highlighted Snowflake's impressive top-line results, which included the largest beat in years and an acceleration in product revenue growth.
The company also reported an increase in customer additions and continued strong bookings. For the second quarter, Snowflake's revenue guidance surpassed consensus expectations by $20 million.
Snowflake's recent performance has led to an upward revision in its full-year guidance by $50 million, albeit this figure is slightly less than the sum of its first-quarter beat and the improved second-quarter outlook. Citi interprets this conservative full-year guidance as a strategic move, rather than a sign of any underlying issues with Snowflake's growth trajectory.
Despite the positive revenue metrics, Snowflake's profitability showed a more mixed picture. The company reported only a modest beat on operating margins and provided second-quarter operating margin guidance below consensus. There was a reduction in the forecast for full-year free cash flow and operating margins by two to three percentage points.
Citi's analysis suggests that while there are several factors to consider beyond the headline revenue beat, the market is likely to respond well to Snowflake's robust growth. The strong financial results are expected to alleviate concerns about potential deceleration in the company's growth.
InvestingPro Insights
According to the latest data from InvestingPro, Snowflake Inc. (NYSE: SNOW) holds a market capitalization of $54.53 billion, reflecting its significant presence in the cloud data platform space. Despite not being profitable over the last twelve months, analysts are optimistic, predicting the company will turn a profit this year. This aligns with Citi's positive outlook and Snowflake's own revenue guidance, which has been revised upwards.
InvestingPro Tips highlight that Snowflake's liquid assets exceed its short-term obligations and that it holds more cash than debt, indicating a strong balance sheet. This financial stability is crucial as the company navigates towards profitability. Moreover, with a revenue growth of 35.86% in the last twelve months as of Q4 2024, Snowflake demonstrates an ability to expand its top line robustly.
While the company's shares have seen a significant price drop over the last three months, the long-term growth potential remains a focal point for investors. For those interested in deeper analytics and additional InvestingPro Tips, there are 6 more tips available at https://www.investing.com/pro/SNOW. To enhance your investing strategy, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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