Snowflake Stock Surges on Canaccord Upgrade to ‘Buy’ After Analyst Day
2022.06.15 16:17
Snowflake (SNOW) Stock Surges on Canaccord Upgrade to Buy After Analyst Day
By Senad Karaahmetovic
Shares of Snowflake (NYSE:SNOW) are up around 4% in pre-market after Canaccord Genuity analyst David Hynes upgraded to Buy from Hold.
The analyst sees an opportunity to “step up” amid a sharp selloff in SNOW shares, which are down over 60% YTD. The upgrade move comes after attending the company’s Analyst Day.
“This is a business that we expect 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),” Hynes wrote in a client note.
The analyst also sees potential for SNOW to achieve its mid-term targets earlier, “which would only amplify the returns.” Hynes adds that SNOW is “one of the highest quality names that we cover.”
Citi analyst Tyler Radke also weighed on Analyst Day and the outlook for SNOW stock.
“Our initial read from a handful of customer/partner conversations is that SNOW’s value proposition and demand levels remain very high, particularly in large traditional enterprise, despite some focus on optimization,” the analyst said in a note.
“We continue to like the long-term Snowflake growth story, however, the near-term consumption volatility and exposure to more discretionary/ad-hoc workloads make it a lower conviction pick.”
