Stock Analysis & Ideas

Snowflake Gets J.P. Morgan Upgrade after Global User Conference

Story Highlights

Snowflake wrapped up its user conference with a new win from J.P. Morgan Securities. The biggest-ever conference showed off some new products, while the latest word from analyst Mark Murphy points to other reasons Snowflake is likely to succeed.

It’s been a big week for cloud computing company Snowflake (SNOW). Not only did the company finish its global user conference—the biggest ever at last report—but the company also landed a win from J.P. Morgan (JPM) Securities.

All of this combined to drive Snowflake up 6.1% in premarket trading today. Those gains held into the day’s trading session as well, as the stock is up over 9%. I remain bullish on Snowflake for all the reasons we’ve seen previously and for the latest word out of JPM.

Snowflake is in something of a rebuilding phase right now. An earlier run-up in the stock seen in the last half of 2021 drove share prices up beyond the $400 mark. That gain didn’t hold for long, as the company began a six-month retracement that ultimately saw share prices flirt with the double-digit level. This, in turn, brings us to today’s prices, around $140 per share.

That’s a level that J.P. Morgan Securities, via analyst Mark Murphy, seems pretty happy with overall. Murphy upgraded his forecast from Neutral to “overweight,” and that included a price target of $165 per share. Additionally, Murphy noted that the company’s current share price was attractive and also noted that Snowflake customers, in general, were reporting high levels of satisfaction with their purchases.

Wall Street’s Take

Turning to Wall Street, Snowflake has a Moderate Buy consensus rating. That’s based on 21 Buys, six Holds, and one Sell assigned in the past three months. The average Snowflake price forecast of $194.50 implies 45.49% upside potential.

Analyst price targets range from a low of $120 per share to a high of $295 per share.

Investor Sentiment is Worsening Somewhat

While J.P. Morgan Securities has upgraded its stance on Snowflake, that opinion isn’t felt universally. Currently, Snowflake has a Smart Score of 6 out of 10 on TipRanks, the second-highest level of neutral. This puts the company a little more likely than not to outperform the broader market.

Hedge fund involvement is one of the biggest problem spots for Snowflake, based on the TipRanks 13-F Tracker. Hedge funds have been reducing their investment in Snowflake since March 2021. The most recent quarter revealed no exception. Hedge funds sold off around 15 million shares in the most recent quarter’s figures.

Additionally, insider trading at Snowflake is heavily weighted toward selling. In the last three months, Sell transactions have led Buy transactions by six to one. Going back over the last 12 months, the picture improves for buyers, but not by much. Sell transactions still led Buy transactions, but this time by 71 to 17.

Retail investors, particularly those who hold portfolios on TipRanks, have been reconsidering Snowflake as well. They’re reconsidering and selling off. While TipRanks portfolios holding Snowflake shares are up 2.7% in the last 30 days, they’re down just under 0.1% in the last seven days.

As for Snowflake’s dividend history, Snowflake is clearly focused on growth, as it has no dividend history. It’s likely hoping to recover those days when it was trading around $400 per share.

The Long, Dusty, Winding Comeback Trail

The boost from J.P. Morgan’s reassessment of Snowflake certainly helps. However, there’s an underlying matter here that goes beyond the issue of simple share price movement. Snowflake has been readying, with just a little fanfare, a whole new slate of tools geared toward its target market.

Snowflake recently concluded its user event, known as Snowflake Summit 2022. This also represented the single largest such conference that the company had seen so far, with four keynote addresses, over 275 separate sessions, over 100 customer speakers, and more.

We’ve heard before about Snowflake’s attempts to break down data silos and better get information into the hands of other users within a business. That’s a project that offers both positive and negative potential outcomes, but there’s more on tap.

Snowflake also showed off its efforts in cybersecurity, its Unistore workload, and its improvements in the Snowflake Marketplace as well.

Snowflake is not only working hard to offer up new tools for customers but also, it’s working to make these tools easier to access. When you connect this point with Mark Murphy’s point about customer satisfaction figures, you get a company that is clearly customer-centric.

That’s likely to serve it well going into an increasingly-likely recession to come. Customers that are satisfied tend to come back, at least, to the limits of their wallets.

This is also likely to have solid long-term effects as well. Customers that are satisfied tend to come back, and they also tell others. Granted, they don’t tell quite so many as they do when they have a bad customer experience, but they do tell others. That word-of-mouth effect is a positive boost to any marketing effort and will give Snowflake that much extra to work with.

Plus, Snowflake already counts several high-profile firms among its lineup of satisfied customers. From financial companies like Capital One (COF) to media companies like Warner Bros. Discovery (WBD), both of which appeared at Snowflake’s recent show, there’s a broad cross-section of business here. That further improves the likelihood that Snowflake will continue to see buyers even if there’s a downturn.

Concluding Views

It’s beginning to look like Snowflake is making a comeback. Will it come back to the $400 level that it saw last December? Probably not. However, it’s already trading above its lowest price targets. That makes its average target look all the more possible. It even gives an outside nod to Snowflake’s highest price targets as achievable once more.

Granted, shares of Snowflake are still expensive. They’ve actually increased over the last week or so, but it seems to be a pretty safe bet that they’ll continue their climb for a while yet to come.

Snowflake has quite a few exciting developments on hand in the cloud computing sector, and it’s got a lot of big names it counts as customers. That’s likely to give it a leg up in making further sales and keeping it running through a recession.

That’s why I’m bullish on Snowflake. It’s already released several exciting cloud-based products, and more are set to follow. It counts some very big names among its established clients and across several different industries.

That ensures that losses in one market sector won’t hit Snowflake as collateral damage. With analysts starting to come around as well, things are looking up for Snowflake.


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