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Snowflake stock
rose on Wednesday after an analyst upgraded it on his confidence that the
data-cloud company will grow from generative AI demand.
Midday, shares were up 2.8% to $119.78. The stock is down
40% this year; the S&P
500 is up 24%.
Brian White, of Moness, Crespi, Hardt & Co., raised his
rating to Buy from Neutral with a $140 price target, which implies a 20%
increase from the stock’s Monday closing price.
“Unsurprising to us, the gen AI propaganda of 2023 has
proven to be a revenue illusion for the software complex in 2024,” White wrote
in a research note. “However, we believe the industry, and Snowflake
, will begin to derive incremental activity from this
long-term secular trend over the next 12-18 months.”
The stock dropped 15% on Aug. 22 after the company reported
second-quarter financials. Despite an earnings and revenue beat, shares tumbled
on a squeeze
to operating margins.
Snowflake is scheduled to report third-quarter earnings on
Nov. 20,
The stock’s drop this year provides an attractive entry
point because the company can keep growing, White wrote.
Louie DiPalma, an analyst with William Blair, has an
Outperform rating without a price target. On Tuesday, he wrote that Snowflake
is software company Palantir’s closest
competitor.
DiPalma has a Underform rating on Palantir
+0.63%
, which just posted stronger-than-expected
financials for its third quarter. Those results, coupled with the
stock drop, could be a good omen for Snowflake coming into earnings.
“Palantir is trading at a $118 billion market
capitalization, compared with Snowflake’s $38 billion, though Snowflake has
greater revenue ($3.5 billion compared with $2.8 billion for the current fiscal
year) and is growing at a similar rate in the same data analytics end-market,”
DiPalma wrote.
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