Snowflake shares soar after report: should you buy it after the jump?

Snowflake shares jumped 13.5% in the Aug. 28 premarket after the company released a quarterly report that exceeded Wall Street forecasts. The strong results were fueled by product revenue growth and strong demand for the company's AI solutions. Analyst consensus is that Snowflake remains a key bet on AI and infrastructure software with potential for further growth.

Shares of Snowflake, a cloud-based data storage, processing and analytics platform, rose 13.5% in the Aug. 28 premarket after posting a strong quarterly report.

The company reported fiscal second-quarter revenue of $1.1 billion, which beat the FactSet consensus forecast of $1.09 billion and was 32% higher than a year earlier.

Product revenue totaled $1.09 billion - also up 32% year-over-year and above analysts' expectations ($1.04 billion). The number of customers increased to 12,062 during the quarter, with 654 customers generating more than $1 million in annualized product revenue.

Meanwhile, on a GAAP (U.S. generally accepted accounting principles) basis, the company recorded a net loss of $297.9 million. However, on an adjusted basis, Snowflake reported net income of $129.3 million, or $0.35 per share versus an expected $0.27.

Snowflake initially gained notoriety as a platform for migrating enterprise data to the cloud. Today, its revenue growth is increasingly supported by the adoption of artificial intelligence in companies, which is increasing demand for modern data infrastructures, MarketWatch notes.

"We have a huge opportunity ahead of us as we continue to help businesses unlock their potential through data and artificial intelligence," said CEO Shridhar Ramaswamy.

According to him, already 25% of all cases on the platform are related to AI. Snowflake's recent products in this area have generated significant interest, and the company plans to expand their lineup. In particular, the Snowflake Intelligence platform, launched in June, allows customers to create intelligent agents based on corporate data.

For the third quarter, the company expects revenue in the range of $1.125 billion to $1.130 billion, above the average analysts' forecast of $1.117 billion. The acceleration in product revenue growth has also allowed the company to raise its full-year guidance: Snowflake now expects $4.395 billion versus the $4.325 billion reported last quarter.

Wall Street's optimism about Snowflake was evident even before the reports were published. Last week, Bank of America upgraded the company's stock rating from "neutral" to "buy" and set a target price of $240, which implies growth of 5.7% from the current value of $227. The securities have already added 26% since the beginning of the year, MarketWatch writes .

Before the reports were released, Jefferies analyst Brent Till called Snowflake "one of the top AI bets and a solid foundation for artificial intelligence development." Following the release of the results, the investment bank raised its target price on the stock from $250 to $270, maintaining a "buy" recommendation, Investing.com clarifies. This implies an upside of 18.9%.

Ahead of the report, Citi analyst Tyler Radke also raised his target from $245 to $250 (upside 10.1%), maintaining a "buy" rating. He expects revenue growth to accelerate in the second half of the year due to AI adoption, TipRanks emphasizes.

DA Davidson analyst Gil Luria reiterated a "buy" recommendation and $250 target (upside 10.1%), calling Snowflake "one of the best ideas in infrastructure software." He believes the company is showing solid growth in its core business and has a good outlook for Snowpark's products. They allow you to use Java, Scala and Python to write data processing logic right inside Snowflake.

According to TipRanks, shares of Snowflake have a Strong Buy rating based on 31 "buy" recommendations and three "hold" recommendations. The average target price is $235.18, which implies a 3.6% upside from current levels.

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