Macquarie starts Snowflake at ‘neutral’ on balanced growth, competitive risks

Investing.com -- Macquarie initiated coverage of Snowflake Inc (NYSE:SNOW) with a “Neutral” rating and a $160 price target, citing the company’s strong position in cloud data warehousing but noting risks from aggressive revenue guidance and rising competition.

“We like the company's core cloud data warehouse opportunity and momentum, market expansion opportunities and disciplined execution,” analyst at Macquarie said.

Snowflake is disrupting the $80 billion analytic database management system (DBMS) market by offering a cloud-based data platform that consolidates information for AI-driven insights, business applications, and data sharing.

Macquarie highlighted Snowflake’s ability to expand into data engineering and AI/ML, as well as its strong execution and “Rule of 40” metrics, which indicate robust growth and profitability potential.

However, the firm expressed concerns about Snowflake’s positioning against hyperscalers in generative AI, growing competition from Databricks, and macroeconomic pressures affecting its consumption-based revenue model.

“We see some risks from more aggressive FY26 product revenue guidance, competitors' AI positioning, and macro pressures on consumption,” analyst added.

Additionally, the company’s fiscal 2026 product revenue guidance is more aggressive, leaving less room for upside surprises compared to prior years.

Macquarie estimates Snowflake’s revenue will grow 24% year-over-year to $4.49 billion in fiscal 2026 and 23% to $5.52 billion in fiscal 2027, with free cash flow margins of 25.3% and 26.0%, respectively.

Its $160 price target is based on a blend of valuation methodologies, including a 10x enterprise value-to-revenue multiple for 2026.

Upcoming catalysts for the stock include its first-quarter earnings report in late May and an investor session at its annual customer conference in early June.

Macquarie believes Snowflake’s strengths and risks are balanced, warranting a neutral stance at current levels.