The reason for the eye-popping valuation of Snowflake stock remains a question mark for some on Wall Street in the wake of the company’s initial public offering, while others expect the company to eventually join the ranks of software industry leaders.
San Mateo, Calif.-based Snowflake (SNOW) continues to draw mixed reviews as more analysts initiate coverage on the provider of cloud-based data analytics software. Nine analysts initiated coverage on Snowflake stock with overweight or buy ratings on Monday, while seven rated the company neutral or hold. That’s consistent with earlier mixed initiations.
Snowflake’s volatile September IPO raised $3.4 billion, the most ever by a software company. Even so, the enterprise software maker might have done better.
With underwriters pricing Snowflake stock at 120, shares started trading at 245. Snowflake stock popped as high as 319 in its first day of trading on Sept. 16 and closed near 254.
Snowflake Stock: Data-Sharing Tech A Game-Changer?
Snowflake stock currently trades at a very rich multiple — nearly 47 times its estimated 2022 revenue. That’s about double the average valuation of similar software companies. And, many of them trade at historical high valuations amid a revived bull market.
At Mizuho Securities, analyst Gregg Moskowitz started coverage with a buy rating and price target of 300.
“We believe SNOW’s cloud-based platform is substantially ahead of the competition at this time, and that its technological proficiencies are very difficult to replicate at scale,” Moskowitz said in a report to clients. He added: “We also believe that SNOW’s secure data-sharing technology is underappreciated and will become a game-changer.”
At Credit Suisse, analyst Brad Zelnick initiated coverage with a neutral rating and price target of 250.
“We view Snowflake as a true pioneer in cloud-native data analytics and believe the company will play an increasingly important role across the entire data value chain, enabling enterprises to glean deeper insights and increasingly embrace data-enabled approaches to business operations,” Zelnick said in his report to clients.
He added: “We do, however, believe much of its future success is already priced into the stock, with little room for error.”
Tools Used By Amazon, Microsoft, Google
Snowflake sells cloud computing-based technology for storing and analyzing data. Snowflake’s tools share data across cloud computing services provided by Amazon.com (AMZN), Microsoft (MSFT) and Alphabet‘s (GOOGL) Google. Amazon represents the lion’s share of Snowflake’s revenue.
Snowflake competes with Amazon Web Service’s “Redshift” data analytics platform and Google’s BigQuery cloud tools. It also competes with legacy, on-premise IT firms such as Teradata (TDC), IBM‘s (IBM) Netezza and Oracle (ORCL). Other rivals include cloud companies that built products around Hadoop, an open-source software framework.
In addition, Salesforce.com (CRM) holds a stake in Snowflake.
Two former Oracle engineers — Benoit Dageville and Thierry Cruanes — along with Marcin Zukowski, formerly the chief executive of startup Vectorwise, started Snowflake in 2012. Further, the company holds patents in database architecture, data warehouses and other areas.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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