Although data company Snowflake has a strong product offering, continued overhangs leave Wolfe Research less confident about the company’s future. “When we launched coverage in April 2022. … we were excited that SNOW has the best management team in software, the best product, and the best growth rate (potential ~50% revenue growth in CY24). While we still see all of the above as possible “Current valuations don’t leave much room for error, while the macro has worsened, the competitive landscape has changed and the growth outlook is very different,” analyst Alex Zukin wrote Thursday. Zukin downgraded Snowflake shares to Outperform. He also removed his price target, which was previously at $160. The stock closed at $147.91 during the trading session on Thursday. The analyst said macro overhangs lowered the company’s growth expectations from 47% product revenue growth in fiscal 2024 to 34% year-over-year growth. “We also see increasing competition from Databricks & Microsoft who are clearly competing for the same workloads, memory sharing and dollars, possibly creating incremental execution headwinds,” Zukin added. He noted that the growth of large language models and generative AI applications has caused a shift in the enterprise data storage and data infrastructure industry. To be sure, he’s still optimistic about the company’s leadership—he calls it “the best management team in software”—as well as the best software-as-a-service product. Shares of Snowflake were down 0.6% before the bell on Friday. The stock is up just 3% in 2023, trailing the S&P 500’s gains. Meanwhile, the stock has jumped more than 16% over the past 12 months. “Furthermore, we look for better visibility of short-term and long-term growth at the current valuation,” Zukin said. —CNBC’s Michael Bloom contributed to this report.
Wolfe is downgrading the well-known data company due to concerns about the macro outlook
