Analyst Note| Julie Bhusal Sharma |
In its first investor day today as a public company, Snowflake set big, bold targets for eight years from now which we believe are even on the conservative side given the still early innings of cloud migrations--which are the root of accelerating data demands. Snowflake’s total addressable market in years to come is largely undefinable, in management’s own words, and we concur. The no-moat firm which grew its top line past 120% in the past fiscal year reported that its current TAM is $90 billion, up from $81 billion at the time of its IPO nine months ago. Snowflake’s rapidly growing addressable market led the company to set fiscal year 2029 targets for $10 billion in product revenue with non-GAAP operating margins of 10% plus--with 10% being described as the “worst case scenario.” We agree with the sentiment, as we think Snowflake’s 2029 targets are conservative given the early stages of cloud workload migration. The momentum in workload migration is prompting a boom in data storage and analytics due to the ease of scalability and the higher expectations consumers and business have in product customization or general insights available via data. In fact, we think that Snowflake can reach nearly $13 billion in product revenue by 2029 with a non-GAAP operating margin of 29%. These assumptions are baked into our $204 fair value estimate for Snowflake, which we are maintaining and leaves Snowflake fairly valued, in our view, given our very high uncertainty rating.