Snowflake Inc. (NYSE:SNOW), established in 2012, is a prominent player in the field of data management and analytics, particularly amid the surge in artificial intelligence (AI) adoption and the transition to cloud computing. Despite questions about being unprofitable and its valuation, Wall Street remains optimistic about Snowflake’s long-term outlook.
Snowflake’s stock journey has been volatile, with a 24.5% decline year-to-date, contrasting with the Nasdaq Composite’s (NASX) gain of 7.4%. However, the stock is trading 36% below its 52-week high, indicating a potential buying opportunity.
In February, Snowflake announced leadership changes, with Sridhar Ramaswamy taking over as CEO following Frank Slootman’s retirement. While such changes may raise investor concerns, they also present an opportunity for organizational growth, especially amidst the AI revolution.
Snowflake’s revenue continues to surge, driven by robust product revenue and a strong customer base. In the fourth quarter of fiscal 2024, product revenue reached $738.1 million, contributing to total revenue of $774.7 million. The company boasts 461 customers with over $1 million in trailing 12-month product revenue and a net revenue retention rate of 131%.
Despite ongoing losses, Snowflake has reduced its losses per share and maintains a healthy balance sheet with substantial cash reserves and adjusted free cash flow.
Management anticipates continued revenue growth, with modest projections for the first quarter of fiscal 2025 and beyond. Analysts foresee significant revenue growth in fiscal years 2025 and 2026, potentially leading to profitability.
Considering Snowflake’s price-to-sales ratio and recent analyst coverage, the stock appears attractively valued compared to previous years. Analysts remain bullish on SNOW stock, with target prices suggesting substantial upside potential.
Snowflake faces fierce competition in the cloud data market but has the potential to capitalize on increasing public cloud spending. While the stock may seem expensive currently, long-term prospects remain promising, especially if the company continues to innovate and provide value to its customers.