Snowflake Inc. (NYSE:SNOW) shares soared nearly 24% to a record high in Thursday’s premarket trading after the cloud data company delivered stronger-than-expected quarterly results and raised its annual outlook.
The rally followed Snowflake’s strongest product revenue growth in 13 quarters. Jefferies analyst Brent Thill said accelerating growth shows that businesses are preparing their data for wider artificial intelligence adoption.
Thill told CNBC that Snowflake has more room to expand as AI drives demand for enterprise data platforms. The gain came as Nasdaq futures slipped 0.09% and S&P 500 futures remained flat.
Snowflake, Databricks Lead AI Data Market
Thill said that Snowflake’s accelerating product revenue growth was the key takeaway from its quarterly results. The company also raised its annual outlook after delivering its strongest product growth in 13 quarters.
Thill described Snowflake and privately held Databricks as a duopoly in the market for AI data infrastructure. Companies need to centralize and organize their data before they can deploy AI tools, he said.
While Databricks is growing faster, Snowflake may have more room to accelerate. Thill said the two platforms can coexist because businesses often use both technologies.
Snowflake has also improved its products under CEO Sridhar Ramaswamy, Thill said. He credited Ramaswamy with closing previous product gaps and pairing those improvements with the company’s strong sales organization.
“That’s where the magic’s happening,” Thill said.
Jefferies Sees Revenue And Margin Upside
Thill expects Snowflake to benefit from faster revenue growth and wider profit margins. He said its operating margin could eventually reach about 30%, compared with the company’s current low-to-mid-teens outlook.
Jefferies maintained a $385 price forecast, which Thill said offered further upside even after the stock’s sharp post-earnings rally.
However, he acknowledged that Snowflake’s valuation appears stretched. Still, Thill said investors are gravitating toward high-quality companies with clear AI exposure, particularly in infrastructure and cybersecurity.
Snowflake remains expensive, but it trades at a lower valuation than some other leading AI software companies relative to its growth, he added.
Technical Analysis
Snowflake traded 16% above its 20-day simple moving average of $325.99. It also stood 73.4% above its 200-day average of $218.03.
The 20-day average remains above the 50-day average of $292.51. In addition, the stock formed a golden cross in July. That bullish pattern occurs when the 50-day average rises above the 200-day average.
However, Snowflake’s large gains increase the risk of a pullback. Its relative strength index stood at 46.07. That neutral reading suggests the stock is no longer overbought after reaching elevated levels in August.
The former 52-week high of $341.95 could now serve as support. Meanwhile, $378 represents the nearest resistance level.
Thill said Snowflake’s operating margin could eventually reach about 30%. That compares with its current low-to-mid-teens outlook. Jefferies maintained its $385 price forecast despite concerns about the stock’s valuation.
Analyst Outlook
Snowflake carries a consensus Buy rating and an average price forecast of $344. BTIG raised its forecast to $424 on Thursday. Rosenblatt recently lifted its forecast to $345, while Cantor Fitzgerald increased its forecast to $405.
Benzinga Edge Rankings
Snowflake has a Momentum score of 93.6 on the Benzinga Edge scorecard. The strong reading reflects the stock’s gains and its position above major moving averages.
However, the stock’s sharp advance also raises the risk of a return toward its longer-term averages.
ETF Exposure
Snowflake accounts for 7.17% of the Global X Cloud Computing ETF (NASDAQ:CLOU). It also represents 6.70% of the YieldMax AI & Tech Portfolio Option Income ETF (NYSE:GPTY) and 4.60% of the Neuberger Berman Disrupters ETF (NYSE:NBDS).
Large inflows or outflows from those funds could affect demand for Snowflake shares.
SNOW Price Action
SNOW Price Action: Snowflake shares were up 23.64% at $378.14 during premarket trading on Thursday. The stock is trading at a new 52-week high, according to Benzinga Pro data.
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