2. Snowflake Inc. (NYSE:SNOW)
Average Analyst Price Target Upside: 51.12%
Number of Hedge Fund Holders: 69
One of the best long term tech stocks, Snowflake Inc. (NYSE:SNOW) offers a cloud-based data platform that has revolutionized how organizations handle and analyze data. With its advanced data warehousing solutions, it allows businesses to efficiently store, manage, and share vast amounts of information in real time.
The core of the company’s offering is its cloud data platform, which features a unique architecture that separates storage from computing resources. The design allows customers to adjust their resource allocation independently, which helps avoid the hefty hardware investments typically associated with traditional data management systems.
The range of services provided by the company includes data integration, sharing, and advanced analytics, which serve a wide variety of industries such as healthcare, finance, and retail.
As businesses increasingly rely on data to drive decision-making, it is well-positioned to capitalize on this growing demand. The stock has a consensus Buy rating from 46 analysts and the average price target of $170.00 has an upside of 51.12% from the current levels, as of September 26.
The surge in AI usage further amplifies the need for robust data solutions, and the company’s infrastructure is crucial for supporting these AI workloads. To enhance its capabilities, it has invested in graphics processing units (GPUs), which are important for managing the heavy computational demands of AI.
While these investments have impacted profit margins due to the high costs associated with GPUs, the company’s leadership is focused on ensuring that spending aligns with revenue growth.
At a recent conference, CFO Mike Scarpelli indicated a careful approach to future GPU purchases, emphasizing the importance of revenue to support such investments. He said, “I’m not going to buy any more GPUs until I see the revenue to support it.”
His comments signal a focus on balancing growth with profitability, which can ultimately benefit shareholders. The long-term outlook for Snowflake (NYSE:SNOW) is incredibly promising, as management estimates its addressable market was valued at $153 billion last year, with projections indicating it could reach $342 billion by 2028.
Baron Fifth Avenue Growth Fund stated the following regarding Snowflake Inc. (NYSE:SNOW) in its Q2 2024 investor letter:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform that is predominantly used for data analytics. The stock declined 16.4% as investors evaluated the impact of a recently announced CEO transition, an investment cycle driven by spend on AI, a cybersecurity incident, and a rapidly changing competitive environment. With GenAI capturing a larger portion of the public discourse, Snowflake’s positioning in the future data stack is under scrutiny by both investors and customers. We believe Sridhar Ramaswamy, the newly appointed CEO, can help the business more efficiently transition toward an AI-first world. While Databricks and other key competitors are presenting strong results, we believe Snowflake’s brand, existing customer base, and accelerating product innovation should allow it to continue to capture share in a relatively large and strategic market. Management continues to describe strong demand trends for its core data analytics, which is also demonstrated by the relatively healthy expansion rates among existing customers while new go-to-market initiatives can help grow the customer base further. Longer term, we remain excited about the Snowflake’s strategic opportunity as the data platform for its customers.”
