Snowflake (NYSE:SNOW), which specializes in software for cloud-based data warehousing, certainly wasn’t a darling of the market in 2024’s first half. However, contrarian investors should definitely put Snowflake on their watch lists. The sell-off in Snowflake stock was overdone, and a second-half comeback is almost inevitable.
Analysts are generally bullish about Snowflake, and as we’ll see, one analyst firm even put the company’s stock on its shortlist of high-conviction picks. So, consider buying when others are selling as Snowflake’s critics and short sellers will melt away during this sizzling summer.
Snowflake’s Reputational Issues Persist
Even though Snowflake is involved in the red-hot cloud-computing and artificial intelligence markets, the company is still in the doghouse, so to speak. To a certain extent, this is because Snowflake continues to deal with reputational issues.
Not-so-positive press coverage of Snowflake persists because of reported hacking activity. To be more specific, hackers potentially breached the accounts of up to 165 Snowflake customers.
I can’t prove this, but I suspect that some of the victims chose not to use multifactor authentication. In any case, according to Bloomberg, Snowflake assured that it “plans to close its internal investigation into the hacking campaign and that it hadn’t detected any unauthorized access into its customers’ servers in recent days.”
It might feel like the sky is falling when a company’s reputation is under siege. However, contrarian investors should stay calm and maintain a “this, too, shall pass” outlook when it comes to Snowflake stock. After all, you’re supposed to buy when there’s blood in the streets, right?
Snowflake Stock’s at an ‘Attractive Entry Point’
Despite the share-price weakness, at least one big-bank analyst is optimistic about Snowflake’s new CEO, Sridhar Ramaswamy. In fact, Goldman Sachs analyst Kash Rangan even went so far as to add Snowflake to the firm’s “Conviction List.”
Does beaten-down Snowflake stock trade at an “attractive entry point,” as Rangan believes it does? Let’s look at the facts. For this year’s first quarter, Snowflake generated $828.71 million in revenue even while analysts had only expected $786.26 million.
Furthermore, for the full year, Snowflake raised its product-sales guidance to $3.3 billion from the company’s previous forecast of $3.25 billion. Yet, it feels like the market still isn’t willing to give Ramaswamy a chance.
The bears and sellers are missing out on a terrific opportunity. Ramaswamy is taking Snowflake in a new, AI-focused direction. Snowflake will surely prove the critics wrong in 2024’s second half, and there’s plenty of overhead room for Snowflake stock to recover.
Snowflake Stock: A Rare Tech-Market Bargain
Some folks might complain that large-cap technology stocks are all too expensive. That’s not true at all, though. Snowflake shares are cheap as the company is still dealing with reputational issues and the market is still evaluating Snowflake’s new CEO.
In the coming quarters, the market should finally forgive Snowflake and let it out of the penalty box. When that occurs, expect Snowflake stock to rally 25%, 30% or even more. So, feel free to grab a handful of Snowflake shares before the big recovery happens.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.
