Snowflake’s Downward Momentum Outweighs Its Valuation

Summary:

  • Snowflake’s stock has fallen 25% since my last analysis; while more reasonably valued, slowing growth rates and negative revisions suggest potential continued downward momentum.
  • Snowflake’s multi-cloud strategy, AI investments, and partnerships (e.g., with NVIDIA) are growth drivers, but margin pressures and high SBC spending pose profitability challenges.
  • Snowflake faces competitive risks, particularly from Databricks, and international expansion challenges, raising execution risks despite its strong operational positioning and free cash flow growth.

Dynamic Snowflake

merrymoonmary/E+ via Getty Images

I last covered Snowflake (NYSE:SNOW) in April; I allocated a Hold rating at the time, and since then, the stock has fallen 25% in price, including a substantial drop in price following its Q2 earnings results. Now, I consider the stock


Analyst’s Disclosure: I/we have a beneficial long position in the shares of AMZN, GOOGL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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