Selloff in this data cloud stock is "overdone", Citi says

Investing.com -- Shares in cloud data analytics firm Snowflake (NYSE: SNOW) have fallen more than 30% since its third-quarter results, but Citi analyst Tyler Radke argues the pullback is excessive.

He reiterated a Buy rating on the stock and trimmed the target price to $270 from $300 due to software multiple compression.

Radke said the pullback followed “a smaller beat and broader software AI disruption + valuation concerns." That said, he believes the sell-off was "overdone, with Snowflake featuring one of the stronger AI-proof consumption business models and strong intra/post-Q checks."

The analyst said Citi’s channel checks were “relatively more constructive,” pointing to continued strength in Cortex and Snowflake Intelligence, driven by partners and customers. Partners observed that most customers are now utilizing Cortex in some capacity, marking a significant shift over the past six months.

"The substantial $200M deal with both Anthropic and OpenAI, along with collaboration with Google Gemini, underscores customer demand for the Cortex which is now moving towards more meaningful monetization, following the new AI disclosure of $100M," he noted.

Meanwhile, Snowflake Intelligence is said to be demonstrating meaningful return on investment, with some financial services and retail customers experiencing 20% to 30% higher consumption.

Radke also highlighted accelerating financial services IT spending in its CIO survey, which he believes could provide a tailwind to migration activity. In a recent podcast, Snowflake CEO Sridhar Ramaswamy said that Intelligence now spans more than 2,000 customers, up from over 1,200 in the fiscal third-quarter call.

Looking ahead to the upcoming quarter, Radke expects a beat “in-line with ‘good beat’ of ~3-4%,” despite a higher sequential guide and potentially less favorable holiday timing.

For fiscal 2027 (FY27), the analyst anticipates an initial revenue outlook in the mid-to-high 20% range, supported by ramping AI pipeline and data engineering strength, including contributions from the recent Observe acquisition.

Radke left his FY27 topline estimate roughly 1% above consensus and said it expects “a slightly better beat and guide ahead for FY27."

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