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Analysts: Snowflake’s (SNOW) Rumored Observe Deal Makes Strategic Sense

Snowflake Inc. (NYSE:SNOW) is one of the AI Stocks on Market Radar. On December 23, Baird reiterated the stock as “Outperform” with a price target of $270. Firm analysts see the rumored $1B acquisition of privately-held Observe as strategically logical, with low integration risk.

“Yesterday evening, rumors surfaced (via an article published by The Information) that SNOW could be in talks to acquire privately-held Observe. The rumored ~$1 billion price tag would be SNOW’s biggest acquisition to-date, but we think should still be fairly digestible given the company’s current balance sheet ($4.4 billion of cash and $2.1 billion of net cash at FQ3-end) and FCF generation.”

An Invesco Advisers executive reviewing investment grade California municipal securities in a modern office.

The acquisition of Observe, an AI-native observability startup, would help SNOW boost its capabilities in full-stack observability, enabling enterprises to resolve issues faster and reduce costs.

Privately held Databricks, which is Snowflake’s top competitive threat, has been expanding its platform by being acquisitive and it only makes sense if SNOW does the same. The acquisition, if true, will allow the company to move up the stack and compete better with Databricks.

“We’d also note the technical integration should theoretically be seamless given that Observe is natively built on Snowflake. Overall, out of all the ways for SNOW to branch out up the stack and into the application layer, we think this introduces the lowest level of integration risk, while also making strategic sense (albeit entering into a competitive application monitoring market).”

Snowflake Inc. (NYSE:SNOW) is a cloud-based data storage company providing a data analysis, storage, and sharing platform.

While we acknowledge the risk and potential of SNOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SNOW and that has 10,000% upside potential, check out our report about this cheapest AI stock.

READ NEXT: 10 AI Stocks on the Market’s Radar and 10 AI Stocks Investors Are Watching

Disclosure: None.

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When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

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  • 175 Teslas
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  • 140 Metas
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  • 65 Microsofts
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  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
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