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Snowflake's Mission Critical Tech, Robust Expansion Dynamics, Balanced Financial Profile Make It Worthy Of Premium, Analyst Says

Benzinga · 01/06/2023 12:14
  • Wells Fargo analyst Michael Turrin initiated coverage on Snowflake Inc (NYSE:SNOW) with an Overweight rating and a price target of $170.
  • SNOW shares have traded off nearly -60% TTM (vs. NASDAQ -32%) as valuation levels across software have come into question (over the past year), and concerns around headwinds to cloud consumption models have surfaced (more recently). 
  • Turrin acknowledges tough sledding for many in the current environment.
  • However, the analyst's work suggests SNOW is better built to weather this storm given the company's mission-critical technology, strong expansion dynamics inherent to this model, and impressively well-balanced financial profile worthy of a premium. 
  • Turrin's 2023 Software Outlook expects the investor pendulum will ultimately swing back towards growth throughout the year and saw SNOW as among the most direct beneficiaries. Current valuation levels and prelim FY24 targets also help provide downside support. 
  • The price target reflects CY24 estimates, above peers, justified given demonstrable evidence of potential FCF support in this model, exceptional competitive positioning, and significant replacement opportunity ahead.
  • Price Action: SNOW shares traded higher by 2.48% at $124.58 on the last check Friday.