If “data is the new oil,” Snowflake Inc. is set up for success, according to Needham analyst Mike Cikos.
He quoted that line as he initiated shares of the data-software company with a buy rating Friday, writing that Snowflake
is positioned to benefit strongly from growing interest in data among organizations, even if other companies play into the attractive market as well.
“We believe data is the most critical asset to organizations today, and Snowflake’s platform allows its customers to unlock value by facilitating data-driven decisions and generating new revenue streams,” he wrote, as he established a $240 price target on Snowflake shares. “The data-driven hunt for innovation and customer prioritization of digital transformation are only in the early stages, as we see it.”
While there’s been some concern among other analysts about potential competitive pressures, Cikos sees Snowflake “in a large, nascent market with a jump on competitors.”
Snowflake’s easy-to-use platform and product capabilities are advantages, in his view, as is the company’s consumption-based model, “where customers pay for the value received.”
Cikos is also upbeat about Snowflake’s work with unstructured data.
“Snowflake’s demonstrated focus on unstructured data, which was notably bolstered by the pending Applica acquisition,” he wrote. “We suspect Snowflake is building out the use-case for data engineers, which makes it a better head-to-head competitor versus private company Databricks.”
Despite competition, however, he thinks the “opportunity is large enough to support multiple winners.”
The bullish call from Cikos wasn’t enough to help Snowflake’s stock Friday, as it’s down more than 6% in afternoon trading on a day when the Nasdaq Composite Index
is off about 200 points, or 1.8%, and the iShares Expanded Tech-Software Sector ETF
is down 2.6%.