As companies compete for dominance in the booming artificial intelligence (AI) sector, investment strategist Shay Boloor has highlighted what he believes is an undervalued stock in this space poised to catch investors’ attention.
To this end, the expert pointed out that American cloud-based data storage firm Snowflake (NYSE: SNOW) is the next AI stock to watch, citing the equity’s underlying fundamentals, Boloor said in an X post on February 16.
Boloor sees SNOW as the “engine for AI-driven data liquidity,” a critical component in AI models’ seamless training and monetization.
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“SNOW is the undervalued AI stock everyone will chase. I believe Snowflake is the next AI name set for a massive re-rating as the market recognizes its role as the engine for AI-driven data liquidity — powering seamless model training & monetization,” he said.
Comparing SNOW stock with counterparts
The strategist observed that while its AI counterparts, like Palantir (NASDAQ: PLTR) and Cloudflare (NYSE: NET), have already experienced significant stock growth, Snowflake is still flying under the radar.
He noted that Snowflake is trading at just 42 times free cash flow (FCF), which Boloor believes doesn’t fully reflect the company’s growth potential. Palantir, often referred to as the “Operating System of AI,” boasts a 32% topline growth and 40% FCF margins but is trading at a hefty 181 times FCF.
Similarly, Cloudflare dubbed the “Controller of the New Internet,” is growing at 26% topline with 12% FCF margins, yet its stock commands a 257 times FCF multiple.
Boloor highlighted Snowflake’s 23% topline growth and 26% FCF margins, noting that its projected growth could reach 30% by year-end, positioning the stock for a re-rating. He also emphasized that expanding margins, expected to hit 28%, further bolster its status as a ‘Stage 2 AI winner’.
This outlook adds to the recent growing bullish sentiment around Snowflake. For instance, as reported by Finbold, the stock’s technical setup, strong insider buying, impressive revenue, and improving AI offerings signal the potential for a significant move higher.
Although Snowflake faces competition from entities such as Palantir, its AI products have been recording notable gains in recent quarters. The firm has at least 1,000 deployed use cases and over 3,200 accounts utilizing its AI features, attracting interest due to its interoperability and data transformation capabilities.
Overall, there is more potential for growth in this space, as Snowflake projects its total addressable market to double to $342 billion by 2028.
SNOW stock price analysis
By press time, SNOW was trading at $187.60, down over 2%, but remains above the crucial $150 support, which served as a resistance zone for a prolonged period. Year-to-date, Snowflake’s share price has rallied 21%.
Over at TipRanks, Wall Street analysts also have a positive outlook on Snowflake. A consensus of 32 experts has issued ratings for the stock, with 28 recommending a ‘Buy,’ 4 suggesting ‘Hold,’ and none advising a ‘Sell.’ This consensus categorizes Snowflake as a ‘Strong Buy.’
Regarding price forecasts, the analysts predict an average target of $199 for the next 12 months, representing a 6.08% upside. The highest target is $225, while the lowest forecast is $180.
Although the projections indicate some variance in analysts’ expectations, the general sentiment around SNOW remains bullish in the long term. To realize this potential, the company will need to sustain AI momentum, drive innovation, and ward off competition.
Featured image via Shutterstock
