'It's not too late': UBS advised to buy Snowflake shares even after 35% rally

An analyst at UBS raised his rating and target price on shares of Snowflake, a developer of a cloud-based data storage and analytics platform. He expects them to grow by a quarter and advises to buy. Even though the company's quotes have already increased by 35% since the beginning of the year, UBS believes that the "bullish" trend may continue: companies continue to increase spending on software for working with data. Snowflake's shares rose to their highest level in 15 months in US trading.

UBS analyst Carl Keirstead upgraded Snowflake from Neutral to Buy. He also sharply improved his target price for the company's securities over the horizon of the next 12 months, from $210 to $265, wrote CNBC. The new target suggests they could rise 27% from their closing level on June 3. 

Keirstead called Snowflake one of the beneficiaries of the AI trend, as "large corporations increasingly need off-the-shelf data [for rapid AI analysis and processing]." And while Snowflake's stock is already up 35% since the beginning of the year, he believes "it's not too late to take a positive stance [on them]."

"We are increasingly convinced that we are just in the early stages of what may turn out to be a multi-year investment cycle in the data layer - based on our industry observations and results from Snowflake, Palantir and Databricks," the UBS analyst wrote in a note quoted by CNBC. 

Shares of Snowflake jumped up 2.7% to $214.8 in after-hours trading on Wednesday, June 4. That's the highest mark for the company's securities since the end of February 2024. Over the past 12 months, Snowflake's value has risen nearly 57%.

Snowflake's competitors are looking to meet some of the growing demand, especially its main rival Databricks, Barron's writes. However, according to analysts at Raymond James, there is plenty of room in the market for both companies.  "While the rivalry with Databricks continues, we believe the market is now evolving in a wave scenario that lifts all boats," they wrote on Tuesday, June 3 (as quoted by Barron's). Raymond James maintained a buy recommendation on Snowflake stock.

However, not everyone is so optimistic. Analysts at Guggenheim Securities are confident in Snowflake's core businesses - data storage and analytics - but doubt whether the company will be able to effectively capitalize on AI, Barron's writes.  "We still view Snowflake as a well-managed leader in the cloud storage segment," Guggenheim said in a research note. - Whether the company will become something more remains questionable for now."

Following Snowflake's Investor Day on Tuesday, June 3, 13 analysts immediately raised their price targets on the company's stock, Barron's calculated based on FactSet data. For example, RBC increased its price target to $250, which implies a 20% upside. Mizuho raised target to $235, and TD Cowen - to $240.

All three reiterated a recommendation to buy Snowflake securities, the majority of such ratings on Wall Street (39 out of 51, shows FactSet). Only one analyst recommends selling this stock. The average target price is $221.86, up 6% from the last close.