Shares of data warehouse-as-a-service Snowflake (NYSE:SNOW) jumped 5.79% in the morning session after analyst Brad Reback of Stifel upgraded the stock's rating from Hold to Buy and raised the price target from $145 to $185. The analyst cited positive commentary from key players like Microsoft, Datadog, JFrog, and Confluent regarding earnings, which may suggest that "optimization headwinds are starting to slow." The analyst added that "with easier comparisons in the back half of the year, revenue growth may stabilize around the high 30% range." After the initial pop the shares cooled down to $159.53, up 3.42% from previous close.
What is the market telling us:
Snowflake's shares are quite volatile and over the last year have had 59 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. The previous big move was about one month ago, when the company dropped 6.64% on the news that the ADP payrolls report showed that the private sector added 145k jobs in March, much lower than analysts' expectations for 210k. This triggered concerns of a potential recession amid continued comments from Fed officials that rate hikes are still needed to tame inflation. As a reminder, higher rates have a negative impact on equity valuations, as future cash flows must be discounted back.
Snowflake is up 17.6% since the beginning of the year, but at $159.53 per share it is still trading 19.4% below its 52-week high of $197.98 from September 2022. Investors who bought $1,000 worth of Snowflake's shares at the IPO in September 2020 would now be looking at an investment worth $627.71.
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