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Snowflake Gets Downgrade From Deutsche Bank on Valuation

'Winter is coming' for the stock as it soared in recent days without its fundamentals changing, Deutsche Bank says.
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Snowflake  (SNOW) - Get Snowflake, Inc. Class A Report shares fell sharply Friday after Deutsche Bank analyst Patrick Colville downgraded the cloud service provider to hold from buy.

The analyst kept his price target at $335.

"Winter is coming," as the stock has soared in recent days without its fundamentals changing, he wrote in a report. Snowflake recently traded at $351.08, down 5.95%. But it has jumped 49% in the last month, including that drop.

As of Thursday, the stock traded around 52 times estimated fiscal 2022 sales, so the risk-reward ratio is now balanced, Colville said. Moreover, the March expiration of the lock-up from Snowflake’s September initial public offering will boost the company’s outstanding share count, he said.

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The stock’s potential “may be limited as we wrap up 2020 and investors look to protect their year,” Colville said, according to Bloomberg. To be sure, looking longer-term, Snowflake is “in the sweet spot for key secular trends of this decade,” he said.

Earlier this month, news of stronger-than-expected third-quarter sales sparked price-target increases by analysts.

Snowflake’s revenue totaled $159.6 million in the quarter, up a whopping 115% from last year and above analysts’ forecast of $147.5 million.

Morgan Stanley raised its one-year price target to $265 from $220 on what it sees as “strong” consumption trends behind Snowflake’s sales growth. Morgan Stanley has an equal-weight rating.

Piper Sandler raised its target to $312 from $264, saying it was “impressed” that Snowflake’s product gross margin exceeded 70% for the first time. But it cautioned that a lack of more upward revision to forward estimates suggests “balanced” risk-reward. Piper Sandler has an overweight rating.