Snowflake (SNOW): Valuation Insights as Wall Street Upgrades and AI Launches Drive Investor Interest

If you have been watching Snowflake (SNOW) lately, there is a lot to unpack. Several major Wall Street banks have gotten even more enthusiastic: BofA upgraded the stock to Buy while Wells Fargo reiterated its bullish stance, pointing to Snowflake’s fresh progress in AI and standout launches like Cortex and Snowpark Connect for Spark. Combine these endorsements with the company's unveiling of a new solution that makes running Apache Spark faster and cheaper in Snowflake’s platform, and it is not surprising investor chatter has ramped up ahead of next week’s earnings report.

With the stock up 67% in the past year, yet off over 10% this month, momentum has been zig-zagging between excitement about Snowflake’s product pipeline and nerves about valuation after such a strong run. In the background, Snowflake’s revenue growth remains solid, although not all fast-growing software names manage to sustain both rapid expansion and investor enthusiasm at the same time. The story lately has revolved around whether recent product launches and an AI-powered future will push the company toward a new phase of durable growth, or if these moves are already reflected in the current share price.

This all begs the question: is this recent dip a rare chance to buy into Snowflake’s AI-driven strategy at a discount, or is the market already pricing in more good news than the company can realistically deliver?

Most Popular Narrative: 15.7% Undervalued

According to community narrative, Snowflake shares are currently undervalued by 15.7% when compared to the projections of future growth, profit margins, and industry benchmarks. The valuation is based on analyst expectations that the company will significantly improve its earnings profile over several years, despite being unprofitable today.

"Snowflake's strategic focus on AI-driven innovations, such as Cortex AI and Cortex Agents, positions the company to capitalize on the growing demand for AI and data analytics solutions. This focus is expected to enhance product adoption and drive future revenue growth. The company's expanded product capabilities, with more than 400 product features launched in the past year, strengthen its competitive edge and facilitate multiproduct adoption among customers, which can lead to increased revenue and improved net margins."

Curious how much Snowflake's future depends on sticking to an aggressive earnings turnaround plan? The key analytic levers behind this valuation are bold revenue expansion targets, margin assumptions, and a remarkable profit multiple that could define tech investing for the next decade. Want to see the exact numbers and outcomes that set this price target? The next section of the narrative holds all the details.

Result: Fair Value of $233.37 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, unexpected leadership changes and unpredictable revenue patterns from large customers could easily overturn Snowflake's optimistic outlook in the months ahead.

Find out about the key risks to this Snowflake narrative.

Another View: Testing the Numbers With a Different Lens

While analyst targets suggest Snowflake is undervalued based on future growth and profit margins, our DCF model also points toward undervaluation but instead relies on discounted future cash flows. Does this alternative method support the bullish narrative, or does it introduce caution?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Snowflake for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Snowflake Narrative

If you think a different story is unfolding or want to see how your own perspective compares, the tools are here to help you shape a Snowflake outlook in just a few minutes. So why not do it your way today?

A great starting point for your Snowflake research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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