Snowflake stock fell Friday after Deutsche Bank analyst Patrick Colville cut his rating on the cloud-based data warehouse company to Hold from Buy, largely on a valuation basis.
Snowflake on Friday was recently down 3.6%, to $360.02.
Snowflake (ticker: SNOW) went public Sept. 16 at $120 a share, opened for trading at $245, and has never looked back, crossing the $400 level a few times this week. But with the company’s market value valuation running north of $100 billion, the stock’s valuation has become challenging.
Colville notes that Snowflake has rallied 28% through Thursday since recently reporting fiscal third-quarter results, but there has been “very little change” in the fundamental story. With the stock trading at 52 times his January 2023 fiscal year sales estimate, he says, the risk/reward “is now balanced.”
Colville also notes that the March 2021 lockup expiration will balloon the number of free trading shares to 345.8 million from 32.2 million, potentially creating selling pressure on the stock.
“We continue to believe Snowflake is in the sweet spot for key secular trends of this decade: data driven decision-making and cloud adoption,” he writes. “Yet, pent-up demand for high-multiple names, such as Snowflake, may be limited as we wrap up 2020 and investors look to protect their year.”
Write to Eric J. Savitz at [email protected]
