Snowflake stock drops 18%, faces tough competition, overvalued, but positive growth outlook

From Nasdaq: 2024-12-19 12:28:00

Snowflake Inc. (SNOW) shares have dropped 18.1% in the past year, lagging behind the Computer & Technology sector’s 30.8% growth and Internet – Software industry’s 32.3% return. The company faces tough competition from Databricks, pricing pressures, and rising GPU-related costs due to AI investments.

Snowflake (SNOW) is currently considered overvalued with a Value Score of F. It is trading at a forward 12-month price/sales ratio of 12.5X, higher than the industry’s 2.96X. Despite this, the company’s outlook remains strong with a solid portfolio and expanding partner base.

The stock is currently trading above its 50-day and 200-day moving averages, indicating a bullish trend. Snowflake benefits from a strong portfolio with innovative capabilities like Unistore, Query Acceleration Service, and partnerships with major players like Amazon, Microsoft, and NVIDIA.

Snowflake’s earnings estimates for the fourth quarter of fiscal 2025 show a positive trend, with expected product revenues of $906-$911 million, representing a 23% year-over-year growth. The company anticipates product revenues to increase by 29% year over year to $3.43 billion for fiscal 2025.

While Snowflake has a Zacks Rank #3 (Hold), the company’s solid portfolio and partnerships are countered by competitive pressures and stretched valuation. Investors may want to wait for a more favorable entry point. The company’s earnings estimates show a year-over-year decrease but have exceeded expectations in three of the last four quarters.



Read more at Nasdaq: Snowflake Declines 18% in a Year: Buy, Sell or Hold the Stock?