Why Snowflake Crushed the Market on Tuesday

The company is singled out as a particularly compelling bargain play by a noted investment bank.

The company is singled out as a particularly compelling bargain play by a noted investment bank.

What happened

Frosty data storage company Snowflake ( SNOW 7.32% ) had a hot day on the market Tuesday. Its stock closed over 7% higher, trouncing the sub-1% gain of the S&P 500 index. A new product announcement helped, but it was the inclusion on a new list of prominent growth stocks compiled by a prestigious investment bank that really sent the shares skyward.

So what

Despite the recent comeback in tech stock prices, quite a few still trade at attractive levels. That, at least, is the view of Morgan Stanley analyst Keith Weiss. He published a new report on the subject, in which he identified the best “growth at reasonable price” (GARP) stocks in the sector. Snowflake came in as the best large-cap GARP company in the sector, followed by Zscaler and CrowdStrike.

Finger about to press a green dollar sign key on a PC keyboard.

Image source: Getty Images.

“Our analysis of over 125 stocks through six trough periods during 2014-2021 shows stocks with GARP and high-sales growth factors most consistently outperformed in the 60 days post-trough,” Weiss wrote in his analysis. 

He added that “high sales growth companies have historically warranted an above-average multiple and can experience greater valuation compression during a correction.”

Also on Tuesday, Snowflake announced that it had launched its retail data cloud. In the company’s words, this “empowers retailers, manufacturers, distributors, consumer packaged goods (CPG) vendors, and industry technology providers to leverage their own data, access new data, and seamlessly collaborate across the retail industry.” The company didn’t provide any guidance on how the retail data cloud would impact its business.

Now what

White-shoe investment banks aren’t the kings of the finance world they once were. Nevertheless, when one tags a stock as a standout bargain, investors tend to listen.

Morgan Stanley aside, Snowflake has shown rather encouraging top-line growth lately, despite the disappointing fourth-quarter results it published earlier this month. Weiss just might be on to something with his latest note.  


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