Snowflake upgraded despite facing a 'mountain of challenges'

Snowflake (SNOW) shares were upgraded to Neutral from Sell at Guggenheim Securities. Analyst John DiFucci says the cloud-based data company is still facing a "mountain of challenges," but his discussions with customers were positive, and he says the company remains a "valuable asset."

Yahoo Finance's Josh Lipton and Julie Hyman discuss the note in the video above.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Stephanie Mikulich.

Video Transcript

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JOSH LIPTON: Snowflake gets an upgrade from Guggenheim. The firm raising its rating on the stock from sell to neutral. So Guggenheim, Julie, feeling a bit better about Snowflake. They go to neutral. So they're on the sidelines. Analyst does see a mountain of challenges for the software company. His words not exactly a ringing endorsement. But does say, listen, the near term setup looks attractive. He told his clients. In fiscal 2025 guidance he says in his opinion, it looks beatable here.

JULIE HYMAN: Yeah. And-- and he sort of looks at all of the negatives that have piled up, that mountain that you referred to, including the unexpected resignation of CEO Frank Slootman. The shares are-- are down quite a bit as you can see there. And so this sort of takes that into account and asks the question as you always ask, how much of this is priced in?

Something else that also caught my eye is that the analyst has been doing sort of channel checks if you will. Talking to Snowflake clients, and they indicate optimism that could materialize into consumption in the coming quarters. Now, that's still kind of provisional. Right? Optimism they could materialize into consumption. So it's still-- you can see why it's still a neutral here and not a buy.

JOSH LIPTON: Yeah. I thought it was-- he also talked about that. You mentioned the surprising departure of Slootman, which caught a lot of people off guard of course. Says it's unclear what that means for the company but noted that the CFO talked about wanting to set up the new CEO for success when considering the guidance they offered. In other words, he thinks the CFO is being kind of prudent with the forecast given that there's a new guy in charge there.

JULIE HYMAN: And just quickly as well, the analysts also talked about that Snowflake is a core, a cloud data warehousing company but has had aspirations to expand beyond that. And still it's unclear whether they're going to be able to successfully do that, which I thought was an interesting--

JOSH LIPTON: They reported remember last month. I remember we talked about it and just got hammered on the surprise exit of Slootman and also disappointing sales forecast. That stocks now down about 20% this year.