On Thursday, Snowflake Inc . (NYSE:SNOW) experienced a shift in its stock outlook as HSBC analyst Stephen Bersey adjusted the company's rating and price target. Snowflake's rating was downgraded from 'Buy' to 'Hold', despite a slight increase in the price target to $214.00, up from $212.00.
The valuation of Snowflake by HSBC is based on a 3.0x Price/Earnings to Growth (PEG) multiple, which remains unchanged. The multiple is applied to the firm's projected next-12-month non-GAAP EPS of $1.05, revised from the previous fiscal year 2025 estimate of $1.19. The new price target considers a 5-year non-GAAP EPS compound annual growth rate (CAGR) of 67.8%, an increase from the former estimate of 65%.
According to the analyst, the new $214.00 target price suggests a 9.3% downside. However, the downgrade to 'Hold' rather than 'Reduce' reflects Snowflake's strong earnings momentum. The analyst believes that the stock stands to gain from the increasing adoption of artificial intelligence (AI).
HSBC outlined several factors that could influence Snowflake's performance. Upside risks include the potential for higher-than-expected margins, stronger macroeconomic or stock market conditions, and greater success of new products. Conversely, the company might face challenges from a more competitive environment and weaker-than-expected economic or market conditions.
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