Snowflake (NYSE:SNOW) has recently faced a notable downturn in its stock price, witnessing a sharp decline of over 31% subsequent to the announcement of its fiscal fourth-quarter results. Despite the company outperforming market expectations, investors expressed disappointment over the guidance provided for upcoming quarters, coupled with the unexpected revelation of a CEO change. Nevertheless, a substantial number of analysts maintain an optimistic outlook on Snowflake’s long-term growth potential and perceive the current pullback as a compelling opportunity to invest in this high-growth stock.
In the fiscal fourth quarter of 2024, Snowflake reported a robust 32% year-over-year increase in revenue, reaching $774.7 million. Moreover, the company’s adjusted earnings per share (EPS) soared from $0.14 to $0.35 compared to the corresponding period of the previous year. Impressively, Snowflake concluded the quarter with 461 customers generating over $1 million in trailing 12-month product revenue. Despite these commendable financial achievements, market sentiment soured in response to the company’s guidance for the first quarter of fiscal year 2025, which indicated a potential deceleration in growth.
Furthermore, Snowflake disclosed the retirement of its CEO, Frank Slootman, and the appointment of Sridhar Ramaswamy, formerly associated with Google, as his successor. While this leadership transition introduced an element of uncertainty, Snowflake expressed confidence in Ramaswamy’s capabilities to lead the company forward. Notably, Ramaswamy’s successful stint at Google, where he substantially expanded the advertising business from $1.5 billion to over $100 billion, bolstered investor confidence in his leadership abilities.
Analysts across the board continue to maintain a bullish stance on Snowflake’s future prospects despite the recent market turbulence. Rosenblatt analyst Blair Abernethy upgraded the stock from Hold to Buy, citing optimism surrounding the company’s introduction of new product offerings and the resilience of its ecosystem. Abernethy views the post-earnings weakness in the stock as an opportune moment for investors to capitalize on Snowflake’s growth potential, particularly emphasizing the significance of Snowflake’s developer framework, Snowpark, in driving long-term customer retention.
Similarly, KeyBanc analyst Eric Heath initiated coverage on Snowflake with a Buy rating and a price target of $185. Heath highlighted the company’s sustainable 20% growth trajectory, underpinned by ongoing migrations to the cloud and the expansion of its product portfolio. Heath also underscored Snowflake’s platform for developing generative AI workloads as a key driver of future growth. Moreover, Goldman Sachs analyst Kash Rangan expressed confidence in CEO Ramaswamy’s ability to spearhead growth at Snowflake, citing his proven track record at Google.
In conclusion, while Snowflake’s recent stock performance may have been impacted by short-term challenges, analysts remain steadfast in their optimistic outlook on the company’s long-term growth trajectory. With a consensus Moderate Buy rating from Wall Street, comprising 24 Buys, 11 Holds, and two Sells, Snowflake continues to be viewed as an attractive investment opportunity. However, investors are advised to conduct thorough due diligence and carefully evaluate their investment objectives before making any decisions regarding Snowflake stock.