JPMorgan's recent conversation with a Snowflake (NYSE: SNOW) partner offers valuable insights into the trends expected to drive the company's fundamentals over the next 12-18 months. Snowflake is set to report fourth-quarter earnings on Feb. 28.
Snowflake's stock is up 8.65% year-to-date on excitement around artificial intelligence and associated technologies. Over the past year, the stock is up about 43%.
The Snowflake Analyst: Analyst Mark R Murphy of JPMorgan rates the stock Overweight with a year-end price target of $200 a share.
The Snowflake Thesis: Snowflake's massively scalable cloud-native data warehouse solution positions it to disrupt the cloud data management space. The company's differentiated solution, combined with a solid business model, places it in a strong position for future growth, noted the partner.
Despite lingering challenges from an "optimization hangover", there's a sense that the worst may be behind us. The market's focus is shifting towards AI, with optimism starting to permeate enterprise budgets.
AI - A Significant Tailwind For Snowflake Stock
Snowflake has a significant tailwind in AI, driven by the imperative for data estate modernization. The partner highlights Snowflake's potential to capitalize on the low data maturity across industries, as organizations prioritize centralization and rationalization of data for large-scale AI initiatives.
Additionally, Snowflake appears to have closed substantial deals in Q4, spanning new logos and renewals. While recognizing revenue through consumption may take time, the partner notes a healthy growth trajectory in their Snowflake practice. This, in turn, suggests broader market adoption.
Snowflake's enterprise-centric approach is underscored as a key differentiator. Despite challenges in Snowpark's consumption, the partner expresses confidence in its performance and governance for AI and ML workloads.
Powerful drivers of Snowflake consumption are other products, including Snowpark ML, the Snowflake Feature Store, and Snowflake Cortex.