On Thursday, Morgan Stanley (NYSE:MS) adjusted its stance on Snowflake Inc . (NYSE: NYSE:SNOW), downgrading the stock from Overweight to Equalweight and lowering the price target to $175 from the previous $230.
The firm highlighted a deceleration in the company's product revenue growth, which at 33% year-over-year in Q4, fell short of investor expectations. This slowdown was particularly noted during the period between the holidays and mid-January.
The firm also pointed out that the guidance for Q1 and fiscal year 2025 indicates a further slowdown in product revenue growth, with expectations set at 26-27% and 22% year-over-year, respectively. Additional concerns were raised regarding incremental storage headwinds that could potentially impact the company's financial performance.
Despite these challenges, Morgan Stanley acknowledged Snowflake's strong bookings momentum. However, this positive aspect is counterbalanced by heightened competitive concerns and a management transition within the company. These factors contributed to the decision to revise the price target.
Morgan Stanley's new price target of $175 is based on a 14.5x enterprise value to CY25 revenue multiple, or 0.69x growth-adjusted, compared to Large Caps at 0.65x.
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