High-growth tech stocks are looking pretty toxic these days. Still, that doesn’t mean analysts don’t some of them. In this piece, I’ll take a look at three hyper-growth stocks — SNOW, DDOG, and ISRG — with solid year-ahead upside potential, according to analysts.
Snowflake (NYSE:SNOW)
Snowflake is a unique software company in the data-warehousing space. I like to view the firm as the king of the data cloud. With a sophisticated and open platform that helps clients unlock the power of data sets, it’s not too far-fetched to think the Snowflake platform can help clients save money as they shift from growth to tightening. I also think its valuation has come down to a reasonable level. Therefore, I remain bullish on SNOW stock.
Snowflake can help hyper-growth firms supercharge their growth when times are good, and though many companies are in cost-cutting mode, I still think Snowflake can perform better than expected as users leverage the platform to improve operational efficiencies.
Snowflake’s “noisy” usage-based revenue recognition model (rather than subscription-based) could make the big ups and downs of markets much more noticeable. Not to mention that Snowflake stock used to be one of the “priciest” (more like priciest-looking) stocks, with a price-to-sales (P/S) multiple that used to lie in the triple digits at its peak.
Today, Snowflake trades at 25 times sales. For Snowflake, that’s a palatable multiple. However, compared to almost any other hyper-growth company, that’s still a wildly expensive and absurd multiple that suggests further downside.
