Cloud company Snowflake could rally more than 40% from here, Wolfe Research says

Published Mon, Apr 25 20226:14 AM EDT

The Thanksgiving holiday season is months away, but cloud data company Snowflake is already trading at "Black Friday prices," Wolfe Research said. Analyst Alex Zukin initiated coverage of the cloud data company with an outperform rating, saying in a note to clients Saturday that while the company is down nearly 50% this year and trading at a near two-year low to its peers, an upcoming analyst day could serve as a strong catalyst for the stock. At Snowflake's upcoming analyst day, Zukin expects new product reveals, updated financial targets and a clearer roadmap to reaching $10 billion in annual product revenue by the 2029 fiscal year. Plus, strong quarterly earnings may act as another key catalyst. "For those looking to 'top-grade' software portfolios, we think that asset is SNOW and the time is now," he wrote. Wolfe slapped a $250 price target on Snowflake, representing 44% upside from Friday's close price. Since the start of April shares of the cloud company have plummeted about 24%. Zukin also thinks investors don't understand one of the company's biggest strengths — its ability to convert data management in the cloud into a PaaS, or platform as a service. "This last point was one of the most impactful learnings from our diligence, which we believe creates an important durable structural growth driver and competitive advantage that is not well understood," Zukin wrote. "We see this as a potential game changer as it converts data management in the cloud into a PaaS, enabling businesses to build applications natively on top of the platform, driving not just an ecosystem but a network effect that will propel the company to the next level of growth." Meanwhile, Zukin thinks Snowflake can become the "fourth hyperscaler" given its strong management team and it's already "growing faster than Amazon Web Services at the same size and scale." Snowflake's software as a service is "so good it turned AWS from a #1 competitor, into its top-selling partner (selling $1.2B in bookings last year) and spurring multiple VC's (we spoke with three) to fund companies built natively on its platform," Zukin wrote. — CNBC's Michael Bloom contributed reporting.

The New York Stock Exchange welcomes Snowflake to usher in the first day of winter, Dec. 21, 2021.

NYSE

The Thanksgiving holiday season is months away, but cloud data company Snowflake is already trading at "Black Friday prices," Wolfe Research said.