TD Cowen reiterates Snowflake stock rating ahead of earnings

TD Cowen reiterated a Buy rating on Snowflake with a $255 price target, implying about 49% upside from the current $171.27 share price. The firm cited strong partner feedback, accelerating consumption trends, and growing adoption of Snowpark, machine learning, and AI as reasons for optimism ahead of Snowflake’s May 27 first-quarter results. Recent analyst support and the federal OneGov AI Data Cloud deal reinforce a constructive outlook, though the article remains largely commentary rather than hard new financial results.

Analysis

The setup looks less like a valuation re-rating story and more like a forward multiple reset on improving durability of consumption. If partner chatter is right, the market is still underestimating the mix shift toward workloads that are harder to unwind than classic data warehouse spend: migration, governance, and AI-native applications. That matters because it can steepen revenue per customer without requiring a massive net-new logo cycle, which is the cleaner path to upside in a macro that still penalizes long-duration software.

The second-order winner is likely the ecosystem around Snowflake, not just the stock itself. A credible federal deployment can become a reference point for regulated verticals—defense, healthcare, financials—where procurement wins often lag by 1-2 quarters but then cluster, creating a non-linear demand wave. That said, the market may be overpricing immediate AI monetization; AI adoption can lift usage, but it also increases scrutiny on gross margin mix and capacity planning, which can cap near-term operating leverage if consumption accelerates too quickly.

The main risk is not the print, but guidance quality. If product revenue beats yet consumption commentary is cautious, the stock can still sell off because positioning is leaning into acceleration and multiple expansion into earnings. Time horizon matters: the next 1-3 trading sessions hinge on guidance and CoCo commentary, while the next 2-3 quarters depend on whether AI and migration offset optimization pressure from large customers.

Consensus appears to be missing how much of the upside is about persistence, not growth rate. A modest re-acceleration can support a sharp move because sentiment is still anchored to the prior deceleration regime, but the stock likely needs evidence of sustained billings/usage inflection to justify a durable re-rate. In other words, the asymmetry is good into the event, but post-earnings follow-through will depend on whether the company can prove that this is a multi-quarter inflection rather than a one-quarter relief rally.

Key Decisions for Investors

• Long SNOW into earnings with a defined-risk structure: buy 1-2 month call spreads centered just above current spot; target a 1.5-2.0x payout if guidance confirms re-acceleration, cut if commentary implies consumption normalization.
• For equity books, add SNOW on a 2-4 week horizon only on post-earnings pullbacks above the 50-day trend; avoid chasing into the print because the setup is crowded and implied volatility is likely elevated.
• Pair trade: long SNOW / short a slower-growth cloud software name with similar multiple sensitivity if the goal is to isolate AI-driven consumption inflection; use it only if earnings prove that usage is improving rather than just guidance optics.
• If SNOW gaps up >8% on earnings, consider taking partial profits quickly: the market may fully price the near-term upside faster than fundamentals can re-rate, especially if gross margin or operating leverage is ambiguous.
• For event-driven desks, sell put spreads instead of naked long stock if wanting bullish exposure; this captures elevated IV while limiting downside if the market decides the AI story is still too early.