Snowflake: An AI Stock with Potential for 63% Upside in 2024


Snowflake (NYSE:SNOW), founded in 2012, stands out as a major player in data management and analytics amid the surge in artificial intelligence (AI) technology. Despite being unprofitable and facing an overvalued stock, SNOW has drawn attention from investors due to its impressive growth trajectory in response to the increasing demand for data analytics and cloud computing services.

However, the company’s stock journey has been turbulent, with SNOW shares declining by 24.5% year-to-date, contrasting with the Nasdaq Composite’s 7.4% gain. Trading 36% below its 52-week high, some analysts view this dip as a potential buying opportunity.

Snowflake’s recent leadership transition, with Sridhar Ramaswamy taking over as CEO from Frank Slootman, initially led to market apprehensions. Yet, such changes can often invigorate a company, potentially ushering in new strategies for growth, particularly in the era of AI advancement.

Despite market fluctuations, Snowflake’s revenue continues to soar, driven by strong product revenue growth, professional services, and other segments. In the fourth quarter of fiscal 2024, the company reported a 33% increase in product revenue to $738.1 million, contributing to a total revenue surge of 32% year-over-year.

Snowflake boasts an impressive customer base, with 461 clients generating over $1 million in trailing 12-month product revenue. Additionally, its net revenue retention rate of 131% indicates strong customer retention and satisfaction.

While the company is yet to turn a profit, it has managed to reduce losses and maintain healthy cash reserves. Snowflake’s adjusted free cash flow reached $810.2 million by the end of fiscal 2024, bolstering its financial position.

Looking ahead, Snowflake anticipates modest product revenue growth for fiscal 2025, with analysts projecting continued revenue growth and a potential shift to profitability by fiscal 2025.

Wall Street remains cautiously optimistic about SNOW stock, with analysts reiterating bullish views on the company’s growth prospects under the new CEO. KeyBanc initiated coverage with a “buy” rating and a target price of $185.

In conclusion, while Snowflake faces stiff competition in the cloud data market, its innovative approach and potential for profitability make it an intriguing investment opportunity. Despite its current valuation, sustained growth in public cloud spending could drive substantial gains for Snowflake in the long run.

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About the author: Stephanie Bédard-Châteauneuf has over seven years of experience writing financial content for various websites. Over the years, Stephanie has covered various industries, with a primary focus on tech stocks, consumer stocks, market news, and personal finance. She has an MBA in finance.