snowflake (SNOW 9.41%) stock posted big gains in Friday trading. The data technology company’s share price ended the daily session higher by 9.4%, according to data from S&P Global Market Intelligence.
Although there was no company-specific news driving Snowflake higher today, the company’s valuations benefited from strong earnings results published by leading cloud service providers. In particular, Amazon’s better-than-expected fourth-quarter results helped give Snowflake’s share price a big boost.
Strong demand for clouds bodes well for Snowflake
Snowflake is a leading provider of data-warehousing services and related analytics and data management technologies. The company’s data cloud platform helps large businesses and organizations combine the information they generate Amazon, MicrosoftAnd Alphabet‘s cloud infrastructure services. In turn, strong demand indicators for leading cloud infrastructure providers bode well for Snowflake’s performance.
Amazon published its fourth quarter report after the market closed yesterday. The results showed that the company’s sales increased 14% year over year to $170 billion, well ahead of the average analyst estimate of $166.2 billion in sales. Sales at the company’s Amazon Web Services (AWS) division rose 13% year over year to $24.2 billion.
Amazon’s strong Q4 report follows Microsoft’s better-than-expected results earlier this week. For the second quarter of its current fiscal year, which ended in late December 2023, Microsoft posted revenue of $62.02 billion, beating Wall Street’s call for sales of $61.12 billion in the period. The software giant’s revenue grew 18% year over year in the period, and sales of its Azure infrastructure business and other cloud services grew 30% year over year.
Is Snowflake Stock Worth Buying?
Snowflake stock has seen strong momentum amid enthusiasm around artificial intelligence (AI) and an improving demand outlook for key cloud businesses. On the one hand, the company’s share price is still trading about 46% below the peak it reached in 2021.
SNOW PS Ratio (Forward) data by YCharts
Valued at about 20 times this year’s expected sales, Snowflake’s valuation is highly dependent on growth. The company’s valuation profile means its stock may not be suitable for every investor.
Snowflake, on the other hand, is growing rapidly and is set to play a significant role in the development of analytics and AI services. For risk-tolerant investors, the stock is a worthwhile portfolio addition, but you should assess your personal tolerance for volatility before investing heavily in the stock.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Snowflake. The Motley Fool has a disclosure policy.
Source: www.fool.com
