Apps & Software

Why Goldman Sachs Sees Nearly 50% Upside for Snowflake

Snowflake Inc. (NYSE: SNOW) shares bounced on Friday after suffering what has been a months-long slide. The stock peaked at over $300 a share in February but has since fallen off. While this has been bad for shareholders, one analyst considers it a great buying opportunity.

Goldman Sachs upgraded the stock to Buy from Neutral and raised the price target by five dollars to $275, implying upside of 46% from the most recent closing price of $188.24.

The investment house noted that the stock has corrected about 34%, compared to an 11% decline across Goldman Sachs’ broader software coverage and a 3% decline for the Nasdaq. Considering the company’s strong competitive positioning, the firm continues 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, artificial intelligence/machine learning and secure data sharing, which is expected to drive durable growth for the foreseeable future.

Goldman Sachs further detailed:

As we have seen dominant vendors emerge in SaaS, IaaS, and PaaS, we believe Snowflake is well positioned to capitalize on the shift in data and database to the cloud, which remains in relatively early innings. We believe Snowflake will continue to replace incumbent warehousing solutions owing to their scalable and elastic cloud native data platform while also capitalizing on net new workloads and use cases as DX drives greater digitization within the enterprise and business intelligence (BI) and analytics remains a top priority for spending. Moreover, while we believe the company’s current large and rapidly growing TAM provides runway for continued expansion, we see opportunity for Snowflake to continue to expand its addressable market as the platform’s scalability, ease of use, and efficiency enable new use cases like secure data sharing through the company’s data exchange.

Goldman Sachs framed its bull/base/bear case scenarios as $6.4 billion, $5.2 billion and $4.3 billion, respectively, in calendar year 2025 revenue driving annualized returns of 24%, 15% or 4%, respectively, over the next five years.

Excluding Friday’s move, Snowflake stock had underperformed the broad markets with a pullback of about 33% year to date. In the past six months, the share price was down closer to 20%.

Snowflake stock traded up about 5% on Friday to $197.41, in a 52-week range of $184.71 to $429.00. The consensus price target is $298.50.