A blockbuster market debut and a flurry of deal announcements drove movement for top tech and telecom stocks in the week ended Sept. 18.
Shares in cloud data platform Snowflake Inc. popped then fell after the company opened trading Sept. 16 on the New York Stock Exchange under the symbol "SNOW" at $245, well above its IPO price of $120.
The company raised $3.36 billion in its initial public offering of 28 million shares, making it this year's largest IPO, both in terms of deal size and market cap at offering, and the largest software IPO ever, according to a report from Renaissance Capital, an institutional research and ETF provider.
Some analysts, however, question whether growth expectations for Snowflake have been set too high.
Brenon Daly, a research vice president at 451 Research, compared Snowflake's valuation to that of video-communications provider Zoom Video Communications Inc., whose stock has soared in recent months as more people work and learn remotely amid COVID-19.
"One key difference: Zoom didn't start out that way and has only hit its lofty heights because of a once-in-a-generation pandemic," Daly said. "That makes Snowflake's offering even more overvalued."
Despite Snowflake's lofty valuation, some groups made off better than others from the deal. Those who bought into the IPO prior to its market debut Sept. 16, including private equity and institutional investors, profited far greater than groups like retail investors who purchased shares in the company once it had hit the public markets.
Snowflake's shares more than doubled in value on their first day of trading, but closed the Sept. 17 trading session down 15.5% from their opening price.
Another major development in the tech space — NVIDIA Corp.'s acquisition of ARM Ltd. — gave Nvidia stock a boost during the week.
The deal marks the largest semiconductor-industry acquisition of the year and one of the biggest in history, but the terms and timing of the transaction still make it a relatively cheap buy for Nvidia, some analysts said.
Including an agreed-upon equity transfer of $1.5 billion to ARM employees, that means the total transaction value could reach as much as $40 billion by the deal's completion, which is expected to occur in about 18 months.
"There were much bigger numbers than $40 billion being thrown around when the ARM/Nvidia story first hit the newsflow a few months ago, and the stock continued to go up since then," Stacy Rasgon, managing director and senior analyst at Sanford C. Bernstein & Co. LLC, said. "This may be one of the biggest semi deals in history, but on a financial basis, it looks like [Nvidia] can do this without breaking a sweat."
Nvidia stock rose by as much as 6% this week, but ended up closing Sept. 17 at $498.54, a 2.46% increase from its Sept. 11 close.
Shares in Verizon Communications Inc. also rose after the company agreed to buy TracFone Wireless Inc., America's largest prepaid, no-contract wireless service provider, for $6.90 billion.
Fitch Ratings analyst John Culver said in a note that the transaction provides "strategic benefits" to Verizon, given the telco's current lack of a "significant retail presence in the pre-paid or value segment of the market."
"It's easy to see why Verizon wanted TracFone," MoffettNathanson analyst Craig Moffett agreed in a research note, noting that TracFone's slim profit margins will "immediately spike" as the company's customers are transitioned onto Verizon's network.
While postpaid subscribers pay a recurring monthly bill, prepaid customers sign up with no contract and pay for voice minutes, texts or mobile data prior to usage. Postpaid customers tend to be more profitable than prepaid subscribers as they generally remain with a carrier longer, but the prepaid business targets value-minded customers.
Verizon stock closed Sept. 17 trading up 1.34% for the week.
