Shares of Snowflake (SNOW -0.83%) jumped 6.3% on Monday, following positive analyst commentary.
Morgan Stanley analyst Keith Weiss upgraded his rating on Snowflake's stock from equal weight to overweight. He now sees the software star's shares climbing to $390, up from his previous forecast of $344.
If Weiss is correct, shareholders could enjoy gains of roughly 33% from Snowflake's current price near $293.
Weiss expects Snowflake to continue to enjoy robust demand for its data warehousing services, as more businesses shift their operations to the cloud. Snowflake is adding new customers at a rapid clip, with its total customer count rising 52% year over year to more than 5,400 in the third quarter. It's also gaining new business from existing clients, as evidenced by its sterling net revenue retention rate of 173%.
Snowflake's successful land-and-expand strategy will help it produce free cash flow sooner than many investors expect, according to Weiss. Furthermore, Weiss notes that the stock's recent pullback is providing investors with an opportunity to buy shares at a more attractive valuation.
Snowflake offers highly regarded data management tools at a time when gleaning actionable insights from ever-growing amounts of cloud data is becoming more vital for businesses of all sizes. It's a booming market, one that could approach a staggering $90 billion, according to the company's projections.
That leaves plenty of room for expansion for Snowflake, which grew revenue by 110%, to $334 million, in the third quarter. It also makes Weiss' $390 stock price target entirely plausible.