Citigroup Inc.

🇺🇸New York Stock Exchange
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Citigroup Inc. stock analysis C overview
Slightly Bullish +25

Why Citigroup Still Likes Snowflake but Expects More From This Tech Stock - 24/7 Wall St.

📉 Citigroup maintains Buy ratings on both Snowflake (SNOW) and Thoughtworks (TWKS) despite recent market volatility in the tech sector.

🧐 Analyst Tyler Radke opens a negative Catalyst Watch for Snowflake ahead of earnings due to usage headwinds and high consensus estimates.

💰 Snowflake's $175 price target implies 3% upside from the recent closing price of $170.44, reflecting tactical caution on near-term growth.

📉 Thoughtworks shares are down over 45% year-to-date with a 52-week range between $12.99 and $34.43.

📊 Ashwin Shirvaikar lowered Thoughtworks' price target to $19 from $24 after the company provided below-consensus third-quarter guidance.

⚠️ Thoughtworks cites funding constraints at tech clients and delayed project ramps as primary drivers for its reduced full-year outlook.

🔄 Management at Thoughtworks expects current headwinds to be one-time events with a quick return to normal operations in Q4.

☁️ Snowflake faces specific challenges including fewer signs of new workloads following Graviton2 price cuts and general slowdowns in IT spending.

📈 Citigroup's broader tech strategy focuses on cloud and IT services, identifying these two stocks as offering stable upside potential.

📅 Snowflake is scheduled to report earnings next week, a key event highlighted by the analyst's negative catalyst watch.

Bullish Signals
  • Citigroup maintains a Buy rating on Snowflake Inc., indicating continued confidence in its long-term growth story and management's $10 billion revenue targets.
  • Citigroup reiterates a Buy rating on Thoughtworks Holding Inc. despite lowering the price target, suggesting the stock remains undervalued at current levels.
  • Thoughtworks recently beat second-quarter forecast expectations, demonstrating operational resilience despite challenging market conditions.
  • The lower-than-expected third-quarter outlook for Thoughtworks is viewed by management as temporary, with a quick return to normalcy expected in the fourth quarter.
  • Citigroup analysts view Snowflake and Thoughtworks as offering stable upside potential even after significant year-to-date declines of 51% and 45% respectively.
Risk Factors
  • Analyst Tyler Radke has opened a negative Catalyst Watch for Snowflake ahead of earnings due to building usage headwinds and mixed intra-quarter checks.
  • Snowflake faces specific challenges including fewer signs of new workloads in the second half and a slowdown in cloud and IT spending.
  • Thoughtworks provided below-consensus third-quarter guidance, raising concerns around visibility despite management's expectation of a quick recovery.
  • Funding constraints at some tech clients are negatively impacting Thoughtworks' performance and contributing to lower utilization rates.
  • Snowflake's current consensus numbers for Q3 and fiscal 2024 are viewed as too high by Citigroup analyst Tyler Radke.
  • Thoughtworks' price target was lowered from $24 to $19 following the earnings report, reflecting immediate concerns about client spending.
Full Analysis
Citigroup analysts have issued updated ratings and price targets for two technology stocks, Snowflake Inc. (SNOW) and Thoughtworks Holding Inc. (TWKS), amidst a broader market correction in the tech sector. While Citigroup maintains a Buy rating on both names, the firm is adopting a more cautious stance regarding near-term performance due to emerging headwinds in cloud spending and client funding constraints. For Snowflake, lead analyst Tyler Radke reiterated his belief in the company's long-term growth story, including management's $10 billion revenue targets. However, Radke has opened a negative Catalyst Watch ahead of upcoming earnings, citing usage headwinds, mixed intra-quarter checks, and a slowdown in cloud spending that he believes makes current consensus estimates for Q3 and fiscal 2024 too high. Regarding Thoughtworks, analyst Ashwin Shirvaikar lowered the price target to $19 from $24 following a recent earnings beat but below-consensus guidance. The lower outlook is attributed to funding constraints at tech clients, delayed project ramps, and lower utilization rates, though management expects these issues to be one-time events with a return to normalcy in the fourth quarter. Both stocks have faced significant declines year-to-date, with Snowflake down 51% and Thoughtworks down over 45%. Citigroup's $175 price target for Snowflake implies modest upside from recent levels, while the adjusted $19 target for Thoughtworks suggests a more substantial 24% potential gain from its current trading price.