BofA Securities Turns Bullish on Snowflake (SNOW) Ahead of Q2 Earnings

BofA Securities upgraded Snowflake (SNOW) from Neutral to Buy, raising its price target to $240 from $220, citing improving demand trends and long-term growth prospects in AI and data services. The upgrade, ahead of Snowflake's Q2 earnings, is driven by proprietary data and channel checks indicating momentum in its data warehouse, Cortex AI, and Snowpark businesses, with Q2 product revenue anticipated around $1.06 billion. This positions Snowflake to capitalize on the $155 billion addressable AI software market as customers increasingly adopt it as a critical part of their AI technology stack, despite risks from its consumption-based revenue model.

Analysis

BofA Securities has upgraded Snowflake (SNOW) to Buy from Neutral, raising its price target to $240 from $220 ahead of the company's August 27 earnings report. The upgrade is underpinned by multiple proprietary data sources and channel checks indicating accelerating demand and momentum across Snowflake's core data warehouse business and its emerging Cortex AI and Snowpark developer platforms. BofA anticipates Q2 product revenue will reach approximately $1.06 billion, driven by strong web activity. From a valuation perspective, the new price target corresponds to a 53x CY26 free cash flow multiple adjusted for 1.9x growth. Despite a 47% year-over-year stock increase, the shares are viewed as reasonably valued, trading at a 1.5x growth-adjusted FCF multiple versus the large-cap peer average of 1.6x. The firm highlights Snowflake's strategic position to capture a share of the $155 billion addressable AI software market, though it acknowledges risks associated with competition and its consumption-based revenue model.

Key Decisions for Investors

• Investors should view the upcoming August 27 earnings as a key catalyst, supported by BofA's positive data points and a valuation that, at a 1.5x growth-adjusted FCF multiple, is considered reasonable relative to peers.
• The primary risk to monitor is the consumption-based revenue model, so any guidance on customer spending patterns and budget stabilization will be critical for assessing future revenue predictability.
• Long-term success depends on Snowflake's ability to monetize its emerging AI platforms; therefore, any specific metrics on the adoption or revenue contribution from Cortex AI and Snowpark will be crucial indicators of future growth.