Snowflake Gets First Analyst Rating and it Isn’t Good

Snowflake recently made its debut on Wall Street and now the cloud-based data-warehousing company has received its first analyst rating. A “sell” rating from Summit Insights Group.

The group has called the company the “most expensive name in all tech.”

Shares of Snowflake more than doubled in their first day of trading last week and continued to swing in the following days.

After the offering priced at $120, the stock opened the following day at $245 and proceeded to soar as high as $319 before retracing. The investor enthusiasm is palpable, and the gains were primarily driven by retail investors as opposed to institutional players, according to Axios.

Analyst Srini Nandury is concerned with Snowflake’s lofty valuation, combined with what he considers “limited differentiation” from Amazon’s Redshift, Google’s BigQuery, and Microsoft’s Azure SQL Database.

Snowflake competes with many legacy data warehousing vendors like Oracle, SAP, and IBM. These are huge enterprise tech competitors with deep pockets to contend with, and Summit Insights believes there will be “multiple winners in the market.”

“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 wrote in a research note. “While Snowflake’s management is stellar and is known for its execution, the odds of Snowflake’s stock faltering are high.”

The stock is currently trading at 76 times enterprise value to forward sales, according to Nandury’s estimates.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.