Snowflake: A Bargain When You Consider The Right Metrics

  • Snowflake’s stock has faced volatility due to revised revenue growth expectations, but the recent 40% drawdown seems overdone.
  • The company’s resilient backlog and strong bookings growth in the recent quarter suggest robust underlying demand, with revenue growth still exceeding the 30% threshold.
  • Despite a slowdown in product revenue growth, the stock is undervalued based on EV/Sales/g ratio, compared to peers and has significant upside potential.
  • The decision to include GPU-related costs in expenses and hire key personnel for AI capabilities indicates short-term margin pressure but potential long-term gains in the Generative AI trend.

Investment Thesis

Snowflake’s (NYSE:SNOW) stock has been a roller coaster, largely due to the AI frenzy driving up growth expectations earlier this year, but it faced a reality check when the company significantly trimmed its growth outlook for FY2025. In