### Wall Street Foresees Major Upside for Snowflake Stock Despite Current Challenges

Snowflake (SNOW -0.86%), a prominent cloud data platform company, has seen its shares plummet by 68% from their peak during the pandemic-driven tech boom of late 2021. Despite this significant decline, many Wall Street analysts predict a promising turnaround for the stock. Among the 45 analysts covering Snowflake, the median price target is set at $169 per share, which is about 33% higher than its current share price of $127.

Snowflake's unique cloud-agnostic architecture enables its platform to operate across all major cloud infrastructure providers, distinguishing it from competitors like Amazon and Microsoft. This versatility allows customers to seamlessly integrate, store, transform, and analyze their data. Additionally, its data-sharing marketplace creates a network effect, making the platform increasingly valuable as more clients join.

Despite being affected by a security incident involving over 160 clients and the recent retirement of CEO Frank Slootman, Snowflake is still considered well-positioned for future growth, particularly in the AI sector. The security breach was not due to any vulnerability in Snowflake's products but rather the clients' failure to secure their data effectively. Slootman has expressed strong confidence in his successor, Sridhar Ramaswamy, highlighting Snowflake's central role in the AI revolution.

Snowflake is investing heavily in AI product development, which has impacted its operating margins. However, early indicators suggest these investments will be beneficial in the long run. Products like Cortex, which leverage large language models for various data processing tasks, exemplify Snowflake's commitment to advancing AI capabilities. In a recent Morgan Stanley survey, chief information officers ranked Snowflake third, after Microsoft and Amazon, as the company most likely to capture market share in generative AI spending over the next three years.

Financially, Snowflake reported a 29% increase in total revenue for its fiscal 2025 second quarter, amounting to $869 million. However, this growth represents a slowdown compared to the 33% growth recorded in fiscal Q1. Additionally, non-GAAP earnings per diluted share decreased by 18% year over year to $0.18, partly due to increased spending on product development and marketing.

Looking forward, Snowflake is expected to benefit greatly from rising AI demand due to its robust platform capabilities. While continued investments in AI products may weigh on short-term profitability, analysts anticipate a reacceleration of revenue growth and improvement in profitability as these new products gain traction. Though adjusted earnings are projected to decline by 25% over the next 12 months, they are expected to grow by 34% annually through fiscal 2028.

Given Snowflake's current valuation of 135 times adjusted earnings, the stock remains pricey. For patient investors with a high-risk tolerance, small positions in Snowflake might be worthwhile now; however, many might prefer to wait until the stock trades at a more reasonable valuation.