Shares of cloud-based data company Snowflake (NYSE:SNOW) gained Monday morning after the stock was upgraded from Hold to Buy at research firm Stifel. Stifel also raised its price target to $185, implying upside of 20%.

Analysts pointed to a stabilizing usage environment as one reason for the upgrade. The shift in business trends was supported by comments from major industry players like Microsoft (NASDAQ:MSFT). Snowflake could also benefit from AI growth.

They explained, “We are upgrading shares of SNOW to Buy from Hold as recent commentary from MSFT as well as other 3rd party consumption models (DDOG, FROG, CFLT) lead us to believe the optimization headwinds the group has felt over the last 9 months are stabilizing, and with easing comps in 2H23, we believe SNOW’s revenue growth should stabilize in the high 30% range.”

The analysts have confidence in management and think discipline should continue to drive margins and free cash flow higher.

“Further, we believe the company stands as a net beneficiary from the growth of the emerging generative AI-market, as Snowflake’s data cloud platform contains the data necessary for organizations to effectively train these models for their respective operational needs. Given the above factors, we expect SNOW to remain a best-in-class growth story, and are increasing our CY24/FY25 estimates, and raising our TP on SNOW to $185,” they concluded.

Snowflake edged higher by nearly 4% pre-open.