Shares of Snowflake (SNOW 3.69%) jumped on Wednesday, rising about 3.9%. The tech stock's gain builds on its strong momentum over the last 30 days. Shares have increased a total of about 28% during this period. The data cloud company's stock has benefited from a slew of recent announcements, with several of those announcements being related to the hyped-up artificial intelligence space. In addition, the company reaffirmed its long-term product-revenue target at a presentation for investors on Tuesday.
Snowflake's recent product innovation and management's confidence during the company's investor presentation left many analysts impressed, leading a handful of them to raise their price targets for the tech stock. Among the most bullish analyst upgrades was a target for shares to rise to $235 within 12 months.
Let's take a closer look at why analysts are so bullish.
The path to $235
At least seven analysts have released bullish notes about Snowflake stock since the company's analyst day on Tuesday. Of those seven optimistic analysts, six of them raised their 12-month price targets. Some of the most common reasons for the incrementally more positive outlook for shares were management's confidence and the company's decision to reiterate its guidance for achieving $10 billion in annual product revenue by fiscal 2029 -- a fiscal year that begins in February of 2028 and ends at the end of January in 2029.
Capturing the massive growth that management anticipates in the coming years, Snowflake's annual run-rate product revenue, based on its most recent quarter's product revenue, is currently trending at less than $2.4 billion. So management expects annual revenue to more than quadruple in about five years.
MoffettNathanson analyst Sterling Auty cited Snowflake's confidence in its long-term revenue guidance as one of the reasons for his decision to increase his 12-month price target on the stock from $218 to $235. But he also importantly drew attention to Snowflake Chief Financial Officer Mike Scarpelli's comments about usage on its platform improving to more normalized trends in May and June. "The sentiment with customers over the last 30 days seems to have improved a lot," Scarpelli said during the presentation.
A few other analysts' revised 12-month price targets came in at $200 or higher, with Stifel and TD Cowen analysts setting targets for $200 and $205, respectively.
Expect a volatile ride
It would be difficult to argue against the fact that everything seems to be going right for Snowflake today. In addition to platform usage picking back up, the company has recently announced important integrations with Microsoft and Nvidia, as well as enhanced platform speed and performance (among many other innovations in June alone).
But investors should keep in mind that there are significant risks when it comes to owning stocks with sky-high valuations, priced almost entirely on expectations for future growth. Despite Snowflake's $61 billion market capitalization today, the data cloud specialist consistently loses money every quarter. Snowflake's net loss was about $226 million in its most recently reported quarter -- worse than its approximately $166 million loss in the year-ago period.
Investors who choose to own Snowflake shares despite their risky price tag should expect a wild ride. Growth stocks like this will almost certainly be far more volatile than the S&P 500.
