Snowflake stock rose on Tuesday after MoffettNathanson analyst Sterling Auty gave the firm a buy recommendation. Even though Snowflake was up over 6% earlier in the day, the stock was only up 1.1% as of 12:52 p.m. ET. If Auty is right, Snowflake stock has a lot of upside potential.
What’s the Reason
The Fly reports that Auty sent a message Tuesday morning advising investors to purchase Snowflake stock. The $242 per share price objective he set stood out, though, since it was almost 40% greater than the price at which the stock was transacting when this article was written.
The research company MoffettNathanson isn’t the industry leader. But, it kicked off coverage of Snowflake (NYSE:SNOW), which might lead to additional investment in the cloud computing firm. This may explain why Auty’s message had a more significant effect on Tuesday than expected.
All investors know that stock prices have crashed this year due to the Federal Reserve’s decision to raise interest rates to combat inflation. When interest rates rise, investors prefer “risk-free” assets like government bonds and cash over equities and other forms of investment risk. Snowflake stock is an excellent example of this: Its price-to-sales ratio has dropped from a very high 184 to its current level of about 32.
To be clear, even with a 32 price-to-sales ratio, the product is still relatively pricey. Despite this, investors and experts seem OK with granting Snowflake stock such a high premium for its value. More than doubling its revenue from fiscal 2021 to fiscal 2022, the corporation accomplished this by attracting new clients and convincing existing ones to increase their expenditure over time. It is in the middle of the fiscal year 2023. However, Snowflake (NYSE:SNOW) management has said that by fiscal 2029, revenue would have increased by almost 800% from fiscal 2022 levels.
Snowflake stock market value is essential to keep in mind. Many investors may be put off by the firm’s high valuation. Still, they would be making a mistake if they ignored the company since it is benefiting greatly from the growth in the big data industry.
Snowflake stock rose sharply when an analyst said that the company’s share price might potentially increase by more than 40%.
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