Snowflake Stock Is Blazing Higher Thursday: What's Going On?

Snowflake Inc SNOW shares are ripping higher Thursday after the company reported better-than-expected financial results for the third quarter and raised guidance. Several analysts raised price targets following the print. Here’s what you need to know.

What To Know: Snowflake beat analyst estimates on the top and bottom lines in the third quarter, reporting revenue of $942.09 million versus estimates of $896.99 million, and adjusted earnings of 20 cents per share versus estimates of 15 cents per share, per Benzinga Pro.

Total revenue was up 28% year-over-year. Product revenue came in at $900.3 million, up 29% year-over-year. Net revenue retention rate was 127% in the quarter. Remaining performance obligations totaled $5.7 billion, up 55% year-over-year.

Snowflake guided for fourth-quarter product revenue in the range of $906 million to $911 million, and raised its full-year product revenue forecast from $3.356 billion to $3.43 billion, representing 29% year-over-year growth.

"Our obsessive drive to produce product cohesion and ease of use has built Snowflake into the easiest and most cost-effective enterprise data platform. That is what's leading us to win new logo after new logo, expand within our customer base, and displace our competition over and over again," said Sridhar Ramaswamy, CEO of Snowflake.

In connection with the earnings release, Snowflake said it signed a definitive agreement to acquire enterprise AI company Datavolo and announced a strategic multi-year partnership with Amazon.com Inc AMZN-backed AI data cloud company Anthropic.

Analysts React: Several analysts raised price targets on Snowflake following the company’s quarterly results.

• Piper Sandler analyst Brent Bracelin reiterated Snowflake with an Overweight and raised the price target from $165 to $185.

• Needham analyst Mike Cikos maintained Snowflake with a Buy and raised the price target from $160 to $200.

• Rosenblatt analyst Blair Abernethy maintained Snowflake with a Buy and raised the price target from $180 to $186.

• Keybanc analyst Eric Heath maintains Snowflake with an Overweight and raised the price target from $150 to $185.

• Evercore ISI Group analyst Kirk Materne maintained Snowflake with an Outperform and raised the price target from $170 to $190.

• Wells Fargo analyst Michael Turrin maintained Snowflake with an Equal-Weight and raised the price target from $125 to $150.

• Goldman Sachs analyst Kash Rangan reiterated Snowflake with a Buy rating and maintained a price target of $220.

In a new note to clients on Thursday, Needham’s Cikos said the quarter gave him increased conviction to lift estimates, raising the price target to $200. The analyst expects large order strength to continue into the fourth quarter.

Piper Sandler’s Bracelin characterized the quarter as being driven by “broad-based strength” and “solid” execution. The analyst expects increased contribution of data engineering features to more than offset any potential storage revenue losses, which was a concern heading into the quarter. Bracelin believes Snowflake will sustain greater than 20% growth next year.

Keybanc’s Heath noted that management commentary on the call was “very encouraging” in terms of shifting the narrative on AI. The analyst believes Snowflake is positioned to benefit from public cloud trends as an enabler of AI and generative AI workloads.

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Goldman’s Rangan echoed much of the same sentiment, calling the quarter “impressive” and noting that it helps improve conviction that the company can sustain mid-20s percent revenue growth while delivering 25% free cash flow margins.

“Given the company's strong competitive positioning, we continue to view Snowflake as well positioned to capitalize on a generational shift of data and analytics to the cloud, with strong secular tailwinds including cloud adoption, big data, AI/ML, and secure data sharing which we expect will drive durable growth for the foreseeable future,” the Goldman analyst said.

SNOW Price Action: Snowflake shares were up 33.5% at $172.41 at the time of publication, according to Benzinga Pro.

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Photo: courtesy of Snowflake.