The initial public offering of US technology company Snowflake last week was the equivalent of “yet more cases of champagne arriving at a party well after midnight when the guests are already several sheets to the wind”, says Robert Cyran on Breakingviews. The share price shot up by more than 150% at one point during the first day of trading. Even though shares subsequently fell back a bit, the company is now worth $63bn, compared with the valuation of just $12bn implied by a private funding round earlier this year.
It’s no surprise that investors – which include Warren Buffett’s Berkshire Hathaway – are enthusiastic about Snowflake, says Dan Gallagher in The Wall Street Journal. The firm’s cloud-based software “allows enterprises to rapidly analyse business information faster than traditional database software”. Revenue has “grown by an average of 141% on a year-over-year basis over the past four quarters”. Still, its “stratospheric valuation” will force Snowflake to keep up a “blistering pace” if it is not to disappoint. Even if the business continues to grow at the current rate over the next 12 months, it will still trade at “more than 70 times forward sales”.
The big question is whether Snowflake’s “nosebleed” valuation heralds a runaway shift in market sentiment, says Richard Waters in the Financial Times. It is “hard not to see at least some similarities with the dotcom era”, especially the obsession with “total addressable market” instead of sales or profitability. A new tech bubble might be good for Palantir, which uses similar technology to Snowflake. After years of “dithering about whether or not to go public”, Palantir’s shares will soon start trading in a direct listing.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
What is the 7 year inheritance tax rule and how does it help cut your bill?Speculation is rife chancellor Rachel Reeves has plans to target inheritance tax once again in her upcoming Budget. But the 7 year inheritance tax rule can save you thousands - here’s how it works.
-
HMRC confirms crypto ETN ISA rulesWith crypto ETNs now technically available for UK retail investors, HMRC has confirmed they can be held in an ISA – but there’s a complication
-
Pierre-Édouard Stérin wants to make France great againConservative billionaire Pierre-Édouard Stérin is seeking to lead a political and spiritual renaissance across the Channel. The planning looks meticulous
-
Global investors have overlooked the top innovators in emerging marketsOpinion Carlos Hardenberg, portfolio manager, Mobius Investment Trust, highlights three emerging market stocks where he’d put his money
-
Pinewood Technologies: a drive for growthPinewood Technologies’ platform is one of the best in the business. Investors should buy in
-
'EV maker Faraday Future will crash'Faraday Future Intelligent Electric is failing dismally to live up to its name, says Matthew Partridge
-
Investors should cheer the coming nuclear summerThe US and UK have agreed a groundbreaking deal on nuclear power, and the sector is seeing a surge in interest from around the world. Here's how you can profit
-
8 of the best houses for sale with folliesThe best houses for sale with follies in the grounds – from a five-storey Victorian Gothic tower in Tonbridge, Kent, to a former mill in Oxfordshire with gardens that include a folly on an island in a lake
-
A tale of two Reits – why performance matters for valuationAEW UK and Regional are two Reits that are valued very differently, despite a shared focus on properties outside London
-
Healthcare stocks look cheap, but tread carefullyShares in healthcare companies could get a shot in the arm if uncertainty over policy in the US wanes, but are they worth the risk?
