Snowflake, Inc. (SNOW) has begun to gain ground after a rocky start to the year. Snowflake unperformed the S&P 500 over the past 2-years rising by approximately 37.5% compared to the S&P’s gain of about 39.6%. While hedge funds were selling, its overall growth has helped its ranking on the WhaleWisdom Heatmap rise to 20 from 37.
Snowflake is a technology company that provides a cloud-based data software platform to consumers worldwide to enable consumers to store, consolidate, and analyze information. Snowflake was known initially as Snowflake Computing, Inc. before being renamed to Snowflake, Inc. in 2019. Snowflake offers customers a flexible usage-based model to buy only what they need, allowing Snowflake to grow its revenue as its customers require more capacity. Overall, the technology sector saw a decline in early 2021, and Snowflake was caught in those winds of volatility. However, Snowflake ultimately began to rebound and navigate a steady upward climb.
Mixed Results from Hedge Funds and Institutions
Hedge Funds were actively selling the stock in the third quarter, and the aggregate 13F shares held by hedge funds decreased to approximately 99.5 million from 104.6 million, a change of about 4.9%. Overall, 35 hedge funds created new positions, 67 added to an existing one, 26 exited, and 51 reduced their holdings. In contrast, Institutions increased their aggregate holdings by about 9.7%, to 204.9 million from 186.8 million. Also, since going public in 2020, Snowflake’s 13F metrics showed slow momentum while its closing stock price fluctuated.
Optimistic Revenue Outlook
Analysts predict an initial dip in earnings through to 2022, with an estimated loss of $0.08 in 2022, followed by some forward movement that would bring earnings per share to approximately $0.06 by 2023. Revenue estimates are very encouraging at roughly $1.2 billion by January 2022 and rising to about $2.0 billion by January 2023.
Favorable Price Targets After Third Quarter Results
Analysts appear encouraged by the recent third-quarter results and have been raising price targets. Phil Winslow of Credit Suisse raised the firm’s price target to $465 from $455 and kept an Outperform rating on shares. Winslow noted that third-quarter results exceeded his expectations, and he believes Snowflake will continue to play an important role in the cloud-native data value chain. Morgan Stanley analyst Keith Weiss is encouraged by Snowflake’s potential for expansion and raised the firm’s price target to $344 from $295, maintaining an Equal Weight rating on shares. Joel Fishbein of Truist Securities raised his firm’s price target on the stock to $400 from $350 and kept a Buy rating on shares. Citi analyst Tyler Radke upgraded Snowflake to a price target of $470 from $299 following favorable third-quarter results.
Optimism Beyond 2021
While 2021 has had its share of challenging months for Snowflake, analysts appear optimistic for the future. The cloud computing industry has had opportunities for growth and expansion that Snowflake can leverage. Snowflake has already gained some upward traction in recent months, with the potential for more positive gains beyond 2021. The stock may not be a good fit for everyone at this time but could represent an excellent opportunity for patient investors.