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Why Snowflake Stock Jumped Sharply on Friday

By Daniel Sparks - Nov 27, 2020 at 11:47AM

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The hot tech stock is now hitting all-time highs following its hot initial public offering in September.

What happened

Shares of Snowflake ( SNOW -1.00% ), a cloud-based data warehouse company, jumped on Friday. The stock rose as much as 10.4%. As of 11:00 a.m. EST, however, the stock was up 7%.

The stock's gain was likely fueled by a combination of an upbeat day in the overall market and particular strength in growth stocks like Snowflake.

A chart showing a stock price moving higher.

Image source: Getty Images.

So what

Investors are in a buying mood on Friday. The S&P 500 is up 0.4% as of this writing. The tech-heavy Nasdaq Composite, however, is up 1.1%. Even more, many growth stocks like Snowflake are up several percentage points or more. For instance, electric-car maker Tesla, videoconferencing specialist Zoom Video Communications, and cloud network services provider Cloudflare are all up about 4% to 5% as of this writing.

Snowflake went public in September at a steep valuation and has been winning over even more investment recently, with the company's market capitalization surging to more than $90 billion. With a year-over-year revenue growth rate of 121% in Q2, the investors likely believe these are still early days for Snowflake.

Now what

Investors, of course, should be mindful of the company's pricey valuation. With a $90 billion market cap and just $403 million in trailing-12-month revenue, the market has arguably priced in incredible growth for years to come. 

Investors will get an update on Snowflake's business on Dec. 2, when the tech company will report its first quarterly results as a publicly traded company. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Snowflake Inc. Stock Quote
Snowflake Inc.
SNOW
$341.66 (-1.00%) $-3.45
Tesla, Inc. Stock Quote
Tesla, Inc.
TSLA
$1,009.01 (-0.59%) $-5.96
Zoom Video Communications Stock Quote
Zoom Video Communications
ZM
$185.84 (1.04%) $1.92
Cloudflare, Inc. Stock Quote
Cloudflare, Inc.
NET
$147.69 (-7.51%) $-12.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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