Snowflake (SNOW) – Get Report Monday received positive recommendations from analysts at Deutsche Bank and Piper Sandler, who are impressed with the cloud service company’s growth prospects.
Snowflake shares recently traded at $245.51, up 3.15%, but have slipped 4% since the company’s initial public offering in September.
Deutsche Bank analyst Patrick Colville initiated coverage with a buy rating and a $305 price target.
“Data is the coal of the digital economy,” he wrote in a commentary. Production of the commodity “spurned the Industrial Revolution,” he said.
Now, “we find that capturing and analyzing data is becoming paramount to business success in the 21st century,” Colville said. “We see a world where the use of data is democratizing, many more roles and functions are becoming data consumers. … Our estimates call for data warehouse (analytical processing) spending to grow to $45.2bn in 2024, a 13% CAGR from 2019.”
Brent Bracelin of Piper Sandler began coverage of Snowflake with an overweight rating and a $264 price target.
“SNOW has built a new cloud-native software layer that has the potential to redefine and modernize the enterprise data stack,” he wrote in a commentary.
“Despite high valuation risks that could spark elevated stock volatility over the next six months,” Bracelin issued the strong rating “based on a unique cloud product and proven leadership team capable of executing on a compelling 10-year growth trajectory,” he said.
“A premium valuation is warranted for longer-term oriented investors looking out 3-5 years based on” several factors, he said.
That includes “triple-digit growth last quarter at $0.5 billion revenue scale, a proven leadership team stacked with A-plus talent and a clear path to multi-billion dollar revenue run-rate within two years.”
Last month, investors went absolutely bananas for software initial public offerings, or IPOs. No company highlighted the craze more than Snowflake (NYSE:SNOW) — shares of which have more than doubled from their initial price.
But in the Snowflake-induced haze of IPO stocks, another company caught my attention: JFrog Ltd. (NASDAQ:FROG). This company checks off a lot of boxes that I look for in an investment: founder-led, strong balance sheet, and a barbell approach that seems to be working very well.
That said, two issues give me pause. Read below to get the whole story.
First, the company from 30,000 feet
I’m a big fan of solid mission statements. When those mission statements can easily convey what a technology company does to a non-techie like myself, I like it even more. JFrog’s mission is “to power a world of continuously updated, version-less software.” The company calls this “Liquid Software.”
If that still sounds confusing, think of it this way. Back in 2000, when I used TurboTax to do my taxes, I had to go to the store, buy the CD-ROM with the most up-to-date version (there are always tax changes), and install it on my computer. Only then could I actually start putting my information in.
Today, TurboTax has moved to the web. There’s no physical CD to buy; the software is all updated by the time tax season starts. Huge parts of the process have been eliminated.
But JFrog wants to take it one step further: eliminate even periodic updates, allow software to be continuously and instantaneously updated. The company has six different modules that customers can use to do this, ranging from its core Artifactory (where coding packages can be stored) to Xray (scanning and securing software updates) to the actual distribution of those
- Warren Buffett’s Berkshire Hathaway has made surprise bets on Barrick Gold and Snowflake in recent months, clashing with the investor’s past warnings about gold, tech stocks, and IPOs.
- Berkshire’s bosses may be pursuing smaller, more frequent investments and cashing in on corporate actions, Brian Gongol, a longtime Berkshire shareholder, told Business Insider.
- “I wouldn’t be surprised if Buffett, Weschler, Combs, and Ajit Jain all got on the phone and had a talk where they decided to ‘think small’ with some fraction of the company’s cash pile,” Gongol said.
- Buffett and his team also signaled Berkshire was “the best big investment they could find” when they spent $5.1 billion buying back stock in May and June, Gongol said.
- Visit Business Insider’s homepage for more stories.
Warren Buffett’s Berkshire Hathaway stunned investors when it revealed a $560 million stake in Barrick Gold in August, and shocked them again with its $735 million bet on Snowflake when it went public in September.
After all, the billionaire investor has blasted gold as an inferior asset and repeatedly warned against backing aggressively valued, lossmaking technology companies, and IPOs.
Yet Barrick and Snowflake aren’t necessarily betrayals of Buffett’s principles, according to Brian Gongol, a longtime Berkshire shareholder and close follower of the company.
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“At first glance, the Snowflake investment really does look out of character — even for Weschler and Combs,” Gongol told Business Insider, referring to Buffett’s two portfolio managers, Ted Weschler and Todd Combs.
However, he pointed to Buffett’s description of “work-outs” — investing opportunities driven by corporate actions such as mergers, spinoffs, and reorganizations — in his 1962 letter to investors in his partnership.
“An IPO is
- Billionaire hedge-fund manager Dan Loeb has joined Warren Buffett and Marc Benioff as a Snowflake shareholder.
- Loeb’s Third Point, which counts Amazon and Alibaba among its biggest holdings, revealed a position in Snowflake in its latest portfolio update.
- Buffett’s Berkshire Hathaway and Benioff’s Salesforce both purchased Snowflake stock in private placements immediately after it went public last month.
- Snowflake is a natural fit for Third Point and Salesforce’s tech-heavy portfolios, but it’s an unusual bet for Berkshire given Buffett’s past warnings against tech stocks and IPOs.
- Visit Business Insider’s homepage for more stories.
Billionaire investor Dan Loeb has followed Warren Buffett and Marc Benioff into Snowflake, the cloud-data platform that went public last month and saw its stock price more than double during its first day of trading.
Loeb’s Third Point fund counted Snowflake among its winning investments in September, its latest portfolio update shows. However, it didn’t disclose the size of its stake or when it was purchased.
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Snowflake contributed to an 11.7% gain for Third Point’s portfolio last quarter, outstripping the S&P 500’s 8.9% gain over the same period. Yet the fund’s 3.6% gain for the year to September trailed the benchmark index’s 8.9% rally.
The software company is a natural fit for Third Point, which held stakes in Alibaba, Amazon, Adobe, Salesforce, Facebook, and other tech stocks at the last count.
The same is true for Salesforce Ventures, the investment arm of Benioff’s enterprise-software giant, which backed Snowflake before it went public and bought $250 million of its stock in a private