Snowflake Inc. (SNOW) shares are having a moment. The cloud data company's stock jumped nearly 24% in premarket trading Thursday, hitting a record high after delivering quarterly results that blew past expectations and lifting its full-year outlook.
The catalyst? Snowflake posted its strongest product revenue growth in 13 quarters. That's the kind of number that gets investors excited, and Jefferies analyst Brent Thill thinks the acceleration signals something bigger: businesses are getting their data ready for widespread AI adoption.
Thill told CNBC that Snowflake still has room to expand as AI fuels demand for enterprise data platforms. The stock's surge came even as Nasdaq futures slipped 0.09% and S&P 500 futures stayed flat, suggesting this rally is company-specific, not market-wide.
Snowflake and Databricks: The AI Data Duopoly
For Thill, the key takeaway from Snowflake's quarterly report was the accelerating product revenue growth. The company also raised its annual guidance, which is always a good sign.
Thill describes Snowflake and privately held Databricks as a duopoly in the market for AI data infrastructure. His reasoning? Companies need to centralize and organize their data before they can deploy AI tools effectively. That's the foundational layer, and these two players dominate it.
Now, Databricks is growing faster, but Thill believes Snowflake may have more room to accelerate. He also thinks the two platforms can coexist because many businesses end up using both technologies for different needs.
Thill also gave credit to Snowflake's CEO, Sridhar Ramaswamy, for improving the company's products. He said Ramaswamy has closed previous product gaps and paired those improvements with Snowflake's strong sales organization.
"That's where the magic's happening," Thill said.
Jefferies Sees Revenue and Margin Upside
Thill expects Snowflake to benefit from faster revenue growth and wider profit margins. He believes the company's operating margin could eventually reach about 30%, compared with its current outlook in the low-to-mid-teens. That's a significant jump and would represent a major efficiency gain.
Jefferies maintained a $385 price target, which Thill said still offers upside even after the stock's sharp post-earnings rally. But he didn't shy away from the elephant in the room: Snowflake's valuation looks stretched.
Still, Thill noted that investors are gravitating toward high-quality companies with clear AI exposure, particularly in infrastructure and cybersecurity. Snowflake is expensive, but he added that it trades at a lower valuation than some other leading AI software companies relative to its growth. So, it's pricey, but maybe not as pricey as it looks.
Technical Analysis: What the Charts Say
Let's look at the technical picture. Snowflake was trading 16% above its 20-day simple moving average of $325.99. It also stood 73.4% above its 200-day average of $218.03. That's a big move, and it shows how far the stock has come.
The 20-day average remains above the 50-day average of $292.51, which is a bullish signal. Additionally, the stock formed a golden cross in July, a pattern that occurs when the 50-day average crosses above the 200-day average. That's often seen as a sign of further upside.
However, large gains like this increase the risk of a pullback. The relative strength index (RSI) stood at 46.07, which is a neutral reading. That suggests the stock is no longer overbought after reaching elevated levels in August. So, while a pullback is possible, the RSI indicates there's room for the rally to continue without being technically overextended.
The former 52-week high of $341.95 could now act as support, while $378 represents the nearest resistance level. Interestingly, the stock was trading right around that resistance level in premarket, so it will be interesting to see if it can break through.
Analyst Outlook: Mixed but Bullish
Snowflake carries a consensus Buy rating with an average price target of $344. But several analysts have raised their targets recently. BTIG lifted its forecast to $424 on Thursday, while Rosenblatt increased its target to $345, and Cantor Fitzgerald raised its to $405. These moves suggest that while the stock has run up, there's still belief in its long-term potential.
Momentum and ETF Exposure
On the MarketDash Edge scorecard, Snowflake has a Momentum score of 93.6, reflecting its strong gains and position above major moving averages. That's a high score, but it also means the stock could be vulnerable to a return toward its longer-term averages if momentum fades.
For ETF investors, Snowflake is a significant holding in several funds. It accounts for 7.17% of the Global X Cloud Computing ETF (CLOU), 6.70% of the YieldMax AI & Tech Portfolio Option Income ETF (GPTY), and 4.60% of the Neuberger Berman Disrupters ETF (NBDS). Large inflows or outflows from these funds could affect demand for Snowflake shares, so it's worth keeping an eye on them.
Price Action
As of premarket trading Thursday, Snowflake shares were up 23.64% at $378.14, hitting a new 52-week high. The stock's surge is a clear sign that investors are excited about the company's AI-driven growth prospects, even if the valuation raises some eyebrows.
So, is Snowflake a buy? Thill seems to think so, despite the stretched valuation. The company's accelerating growth, improved products, and potential for margin expansion make it a compelling story. But as with any high-flying stock, there's always the risk of a pullback. Investors will need to weigh the potential upside against the valuation concerns.
