Snowflake Inc.: When Fundamentals Don't Support Technicals

Jan. 22, 2025 12:59 PM ETSnowflake Inc. (SNOW) Stock, , ,
(9min)

Summary

  • Snowflake's revenue growth remains strong, but profitability is a concern due to high valuation multiples and significant stock-based compensation.
  • Despite high customer retention and market competitiveness, SNOW's GAAP EBIT margin is still negative, raising questions about its business model.
  • The stock's momentum is strong, but its valuation appears unjustified compared to peers, leading to a "Hold" rating amid upside risks.
  • Taking into account the above-mentioned upside risks to my initial bearish thesis, I decided to play safe with my rating on SNOW and give it a "Hold" this time around.
  • Looking for a helping hand in the market? Members of Beyond the Wall Investing get exclusive ideas and guidance to navigate any climate. Learn More »
Mixed race boy holding paper snowflake

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Intro & Thesis

I first wrote about Snowflake Inc. (SNOW) in late May 2024 assigning a "Sell" rating as the firm seemed to be slowing down quite meaningfully, which should have in theory led to a massive correction as

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This article was written by

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Daniel Sereda is chief investment analyst at a family office whose investments span continents and diverse asset classes. This requires him to navigate through a plethora of information on a daily basis. His expertise is in filtering this wealth of data to extract the most critical ideas. He runs the investing group Beyond the Wall Investing in which he provides access to the same information that institutional market participants prioritize in their analysis. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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