For the first time since the company’s September 2020 initial public offering, Snowflake Inc’s shares offer attractive valuations, according to Barclays.
A recent selloff, which pushed Snowflake’s shares to SNOW,
That, down nearly 24% from its record closing high in November, gives investors an opportunity to buy a “unique asset” in the software space, Barclays analyst Raimo Lenschow wrote on Wednesday. He upgraded Snowflake’s shares from equal weight to overweight, though he lowered his price target from $393 to $367.
Snowflake shares were up about 3% in Wednesday’s trading.
Lenschow is excited about Snowflake’s opportunity to drive momentum for its platform by capitalizing on data sharing in a “governance-compliant” manner.
“The more providers that use Snowflake, either internally or on data marketplaces, to publish data sets, the more value it drives for data consumers who want to take advantage of the data,” they wrote.
Snowflake already operates a “sticky” platform, he continued, but the data-sharing initiative will “naturally increase viscosity.” They also give Snowflake an opportunity to attract new customers in a low-cost way, as data providers can help attract these customers to the platform.
“Because data is copied but not transferred, there are no associated storage costs for data consumers. For Snowflake, this means that it comes with a stronger margin profile, as it does additional calculations. Which is the high-margin part of Snowflake’s business,” he wrote.
According to Lenschow, overall “the momentum in data sharing continues to build, but it’s still a very early innings, which represents a huge opportunity.”
Lenschow said he’s always liked Snowflake for its “best-in-class retention rates,” but he felt the stock’s valuation was full since its IPO. Now, with valuations now “close to all-time lows,” he’s hailing an “attractive entry point for long-term investors.”
Snowflake stock is down more than 1% over the past three months, while the S&P 500 index SPX,
Has climbed closer to 9%.
Thinking about the broader software landscape, Lenschoe said he has “no doubt” that 2022 will be another strong year of revenue performance for the category, but added that investors “need to remain selective” when looking at software names. the wanted”.
“In this regard, we prefer to stick with cash-flow-protected names,” Salesforce.com Inc. including CRM,
Lenschow is also willing to accept higher appraisals for select vendors such as “Snow or DDOG DDOG,
Where we have high faith in the growth story.”