Snowflake's Shift in Narrative and Product Velocity Key to Future Growth, Analyst Says

Needham analyst Mike Cikos reiterated Snowflake Inc SNOW with a Buy and a $210 price target.

Shares of Snowflake are among the worst performers in Cikos’ coverage year-to-date. The company pulled its long-term guidance and changed the CEO.

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The analyst said that Snowflake has to execute the shift in the narrative. In the meantime, CEO Sridhar Ramaswamy has accelerated the company’s internal product velocity, he noted.

Cikos attributed the recent upturn in Snowflake’s shares to investors understanding Mandiant’s findings and looking for additional appreciation as management execution shifts the narrative.

The analyst noted, “Mandiant’s investigation did not find any evidence to suggest that unauthorized access to Snowflake customer accounts stemmed from a breach of Snowflake’s enterprise environment.”

Snowflake is walking a fine line, as specific customers don’t want Multi-Factor Authentication (MFA) since it would impact some workloads’ machine-to-machine calls, Cikos said. Barring two customers who are especially contentious in finger-pointing, most understand the dynamic cybersecurity landscape. However, headline risk has lengthened the company’s sales cycles, particularly for New Logos, as reflected in Snowflake’s stock price, as per Cikos.

As the industry rallies around Iceberg, some investors are concerned that Snowflake is playing a game of speeds and feeds. The analyst argued that this is not the case. Snowflake’s performance has improved consistently since its founding, with regular workload wins as a high-performance compute engine per Cikos.

The analyst said that by expanding to Iceberg, Snowflake increases the volume of addressable data while removing concerns over vendor lock-in and data duplication/migration. Multiple Enterprise customers have adopted Snowflake as a platform of record, he added. Cikos noted key innovations like Native App Framework and Unistore solidifying the company’s strong position in its customers’ environments.

Cikos projected second-quarter revenue and adjusted EPS of $845.5 million and $0.17.

Price Action: SNOW shares were trading lower by 0.57% at $142.21 at the last check Monday.

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