Snowflake (NYSE:SNOW) Upgraded to ‘Buy’ by Canaccord

Snowflake (NYSE:SNOW), a cloud-based data platform company, stock fell 5.70% (As on June 16, 11:23:15 AM UTC-4, Source: Google Finance) though Canaccord Genuity analyst David Hynes upgraded to Buy from Hold. Hynes maintained his price target of $185 for the stock. The analyst sees an opportunity to “step up” amid a sharp selloff in SNOW shares, which are down over 60% YTD. According to the analyst, this is a business that he expects should sustain growth rates in the 35-40%+ range over the next few years as it scales through $5B in revenue. So, what’s it all mean for the stock? If we take management’s C2028/F2029 targets at face value ($10B in product revenue and 25% FCF margins), then SNOW shares are too cheap. Here’s the simple math: 35x C2028 FCF of $2.5B gets you an enterprise value of $87.5B in 4 years from now (assuming we’ll be looking at C2028 estimates in mid-2026). If we give SNOW credit for about $5B in net cash at that time and assume roughly 385M shares outstanding, that gives us a roughly $240 stock in 4 years, which is better than a 20% annual return from here (note 35x EV/FCF checks out to less than 9x EV/R, so these are not heroic valuation assumptions). The analyst also sees potential for SNOW to achieve its mid-term targets earlier, “which would only amplify the returns.”

Moreover, the analyst is bullish on some of the company’s upcoming products, including native Python support and a new framework for data scientists, both of which could bring “increased consumption and ultimately better monetization,” according to Hynes.

On the other hand, Snowflake has announced plans to bring Python “to the forefront” of its Data Cloud platform with upgrades that extend support for the programming language. At its annual user conference, Snowflake Summit, the database company announced an expansion of its Snowpark developer framework that will give users easy access to a bounty of open source Python packages and libraries. To supplement the rollout of Snowpark for Python, Snowflake also lifted the lid on a series of related upgrades that are currently under development. These include a native integration with Streamlit and other facilities designed to support the development and deployment of machine learning products written in Python. Separately, the firm announced a private preview for a new service that will allow customers to access data stored in on-premise servers from within the Snowflake ecosystem, affording organizations the benefits of the cloud-based platform without the hassle of data migration.

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