Jefferies Moves Snowflake to Buy as Valuation is ‘Back to Reality’
2022.06.28 19:51
Jefferies Moves Snowflake to Buy as Valuation is ‘Back to Reality’
Jefferies analyst Brent Thill upgraded shares of Snowflake (NYSE:SNOW) to Buy from Hold after a major pullback in the high-growth stock in recent months.
Thill also hiked the price target to $200.00 per share from $125.00 to reflect “continued execution on the platform expansion story.”
The analyst also urged investors to “stick with the story over the long-term given its large end markets and plenty of room to double its value while growing into a reasonable multiple.”
“We are upgrading SNOW after a significant compression on its multiple in the last 6-8 months, in part driven by a broader sector drawdown and by continued execution and strength in top-line growth,” Thill wrote in a client note.
The analyst highlighted best-in-class fundamentals, large and growing end-markets, high-quality growth, and “back to reality” valuation.
“We believe current valuations offer an attractive entry point for the stock given its long-term targets. The stock price has declined significantly in recent months, down 63% from its 52-week high and down 57% YTD vs. the IGV down 29%. Its multiple has gone through a sizable contraction over the past few months and now trades at 16x EV/CY23E rev on 54% growth (NET 13x on 36%, DDOG 16x on 37%, ZS 16x on 36%). The co recently reaffirmed its CY28E rev target of $10B, implying a 26% 7-year CAGR which we believe to be very achievable on conservative assumptions,” Thill added.
Snowflake shares are up 3% in pre-market Tuesday.
