Snowflake (SNOW) – Get Report shares fell after Jefferies analyst Brent Thill initiated coverage of the cloud-services company with a hold rating and $250 share-price target.
He likes the company but not its valuation — about 51 times his 2022 revenue estimate and 21 times his best-case 2023 estimate.
The San Mateo, Calif., company’s stock stands “ahead of its fundamentals,” Thill wrote in a commentary, according to Bloomberg.
Snowflake recently traded at $244.80, down 2.5%. It has more than doubled from its Sept. 15 IPO price of $120.
In addition to his concern about valuation, Thill noted that Snowflake faces intense competition in its field.
As for his overall bullishness, Thill likes Snowflake’s management team. It has a “proven track record of building from a base (today an $81 billion addressable market) to much larger total addressable markets over time.”
Last week, Summit Insights analyst Srini Nandury began coverage of Snowflake with a sell rating and a $175 share-price target. He, too, was concerned about valuation.
The stock is “at risk of a violent selloff” after its surge, he said in a report cited by Bloomberg.
“For the stock to work from the current levels, Snowflake needs to execute flawlessly quarter after quarter, and have to live up to lofty expectations and grow into its valuation,” Nandury said.
“While Snowflake’s management is stellar and is known for its execution, the odds of Snowflake’s stock faltering are high.”
The company represents the most expensive stock in the entire technology sector, Nandury said.
At the same time, it has “limited” unique qualities relative to its competitors and faces a stiff challenge from existing companies, he said.