We recently compiled a list of the 10 Most Promising Future Stocks According to Analysts. In this article, we are going to take a look at where Snowflake Inc. (NYSE:SNOW) stands against the other Most Promising Future Stocks According to Analysts.
Rising Market Volatility
Volatility in the equity markets is poised to hit levels not seen for the better part of the year as investors battle a string of developments. The uncertainty around the upcoming US elections and the soaring geopolitical tensions in the Middle East are the latest headwinds sending shockwaves in the market.
A report by MarketWatch indicates that October could turn out to be a spooky month for equities as valuations appear overstretched, with major indices at all-time highs. Analysts are no longer ruling out the prospects of a market crash given that recession fears are rising even though inflation levels have dropped significantly, prompting the Federal Reserve to cut interest rates.
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While expectation is high that the US economy will achieve a soft landing on higher interest rates, leading to lower inflation without causing a major hit to the economy, Michael Darda, chief economist and macro strategist at Roth Capital Partners, is sounding warning bells.
The economist maintains we are marching on ice that’s a bit thinner, depicted by rising unemployment and elevated earnings expectations that triggered market routes in August and September.
“It’s not unprecedented to have a slowdown period that looks like a soft landing, and then a recession ends up taking shape,” he said. “That’s sort of unexpected now because many have been lulled into this idea that the soft landing is going to be a permanent state of affairs for the business cycle. Equity market valuations reflected that coming into the summer.”
“But there’s been some cracks in the business cycle,” he cautioned, noting expectations for the economy, corporates, and the stock market have remained at “super high” levels.
A slowdown in the US economy amid the high interest rate environment comes amid a highly charged election that threatens to rattle the stock market. While indices are at all-time highs at the back of one of the longest bull runs, the prospects of a deep pullback are growing as investors become more cautious ahead of the election.
While the US stocks have often rallied following a major US election, Former Goldman Sachs partner Abby Joseph Cohen believes things could turn around this time around.
“Historically when you go back many cycles you see that the US stock market does pretty well after a major election. There is a sigh of relief and also most people feel that their candidate has won. This year aim not convinced it is going to be a sigh of relief rally. In fact if anything I am quite concerned about what happens if there is agitation of any sort following the election because of uncertainty about results,” Cohen said.
Although there is a good chance that the US stock market will crash this time, many analysts are also saying that things might improve following a very bad September that also saw premium stocks like the S&P 500 plummet and hit all-time lows.
AI-related firms continue to drive market gains, with the S&P 500 up 21% year-to-date. Howard Chan, CEO of Kurv Investment Management, highlighted the importance of monetizing AI initiatives, noting Meta’s share price surge due to strong sales growth.
Analysts are increasingly focusing on promising future stocks, particularly those in advanced technologies, which are expected to withstand short-term pressures and deliver long-term value. Investing in industry leaders with a competitive edge and a strong track record of revenue and earnings growth, combined with low interest rates, is seen as a strategy likely to yield significant returns. Despite market volatility, certain stocks continue to offer substantial opportunities and the potential to generate significant long term value.
Our Methodology
To make our list of the most promising future stocks to buy according to analysts, we made a list of 40 stocks with market capitalization greater than $10 billion, significant average analyst share price percentage upside, and an average rating of Buy or better. They were then ranked in ascending order based on analyst’s upside potential, and the most promising future stocks are as follows.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders as of Q2: 69
Analyst Upside as of October 10, 2024: 36.46%
Snowflake Inc (NYSE:SNOW) stands out as one of the most promising future stocks, according to analysts, as it provides a cloud-based data platform to various organizations worldwide. Its platform offers Data Cloud, enabling customers to consolidate data into a single source of truth, build data-driven applications, and share data and products.
To fulfill customer demand for new product features, Snowflake Inc (NYSE:SNOW) has been renting GPUs, indicating that AI offerings are gaining traction. With the help of large language models (LLMs), Snowflake’s clients can create AI applications and implement them in the safe setting of its data cloud platform.
While the stock has been under pressure in recent months, Snowflake Inc (NYSE:SNOW) has continued to fire on all fronts, depicting an average growth rate of 70% backed by its cloud data warehousing business. The underlying growth figures appear to be sound:
Snowflake’s customer base increased by 21% from the previous quarter, and the company continues to boast a 127% revenue retention rate among current clients. Revenue growth doesn’t appear to be slowing down all that much from where it is now. The long-term potential is enormous in the meantime. By the end of 2028, management predicts its addressable market will have grown from $153 billion last year to $342 billion.
Snowflake Inc (NYSE:SNOW) has enough potential for investors to consider the stock at a valuation that finally gives it a chance to shine because of its strong revenue retention and enormous market opportunity. Consequently, analysts rate the stock as a buy with an average price target of $169.25, implying a 36.46% upside potential.
Baron Funds, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“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.”
Overall SNOW ranks 4th on our list of 10 Most Promising Future Stocks According to Analysts. While we acknowledge the potential of SNOW as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SNOW, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
