- Alex Zukin from Wolfe Research is more positive on Snowflake (SNOW) due to a combination of better demand, improved execution, and AI-driven growth opportunities, shifting the narrative from a decelerating to a reaccelerating company.
- Snowflake benefits from being in the early stages of large enterprises’ cloud and data platform adoption, with a recent trend of increased budget allocations, alongside a more favorable competitive environment where hyperscalers now see Snowflake as a partner rather than a competitor.
- Zukin justifies Snowflake’s potential valuation increase from 12.5 to 15 times enterprise value to sales by comparing it to other high-growth tech firms, suggesting that its durable growth and high free cash flow margins warrant a premium valuation in the “haves” category of investment opportunities.
Wolfe Research analyst Alex Zukin appeared on CNBC’s ‘Money Movers’ to discuss his growing optimism towards Snowflake (SNOW), attributing his positive stance to a combination of improved demand, better execution by the company, and emerging opportunities from AI that could reinvigorate Snowflake’s growth narrative. Zukin highlighted that Snowflake has been seen as a decelerating entity in a competitive market, but recent quarters, specifically Q3, have shown strong rebounds that he believes will continue into the next quarter. He emphasized the ongoing trend of large enterprises still being in the early stages of their cloud and data platform journeys, with Snowflake positioned as a critical vendor, leading to increased budget allocations towards the company’s services over the last six to nine months.
Zukin also pointed out a shift in the competitive landscape where major cloud providers like Microsoft (MSFT), Amazon’s (AMZN) AWS, and Google (GOOG) are now more inclined to view Snowflake as a partner rather than a direct competitor, which could further propel Snowflake’s growth. In terms of valuation, Snowflake is currently trading at around 12.5 times enterprise value to sales, suggesting it could expand to 15 times. This potential increase is justified, according to Zukin, by comparing Snowflake to other high-growth tech companies in the market, which often trade at much higher multiples due to their consistent growth rates above 25%. He argues that Snowflake, with its high free cash flow margins and growth prospects, fits into the category of companies where investors are willing to pay a premium for durable growth, especially when there’s increased conviction in the company’s long-term potential.
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