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.
Subscribe to 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
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Share buybacks rise in the UK – what effect will it have?Share buybacks are gaining popularity in the UK – good news for investors
-
Is now the time to buy Marshalls?Former market darling Marshalls, a landscaping and building products supplier, looks too cheap. Is it time to buy this once-admired stock?
-
Top UK stocks with healthy cash flows and dividend yieldsThree promising UK stocks according to Alan Dobbie, co-manager, Rathbone Income Fund
-
Warren Buffet invests in Domino’s – should you buy?What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
-
4Imprint makes a strong impression – should you buy?4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
-
Invest in Glencore: a cheap play on global growthGlencore looks historically cheap, yet the group’s prospects remain encouraging
-
How to save the dying UK stock marketThe UK stock market is in long-term decline. To fix that, we must first recognise why equity markets exist and who they should serve
