Is Snowflake a Good Investment?

OVERVIEW

Snowflake Incorporation is a company based in the United States. The company offers cloud-based data storage, computing, and management software to customers around the world. The company was founded in 2012.

Why You Should?

  1. Snowflake is a great growth play in an investor’s portfolio. The cloud industry has continued to post strong double (if not triple-digit) growth due to the modernizing economy and the importance of cloud computing and data. Snowflake will continue to report strong growth along with the rest of the cloud industry.
  2. The cloud industry is one of the most profitable in the world. These metrics continue to grow as companies utilize new technology and see higher demand. If Snowflake continues to grow and mature as a company, it might be extremely profitable in the future. This will benefit the company and its investors.
  3. Snowflake took the crown as the largest IPO in the world, coming at over 33 billion dollars. This great investor sentiment has helped the company gain backing from investors like Warren Buffet and Morgan Stanley. This investor sentiment has for the most part continued to help the company grow its stock price and will help it grow in the long term.

Why You Should Not?

  1. The company faces tough competition in the cloud industry. Some of these companies include Google, Microsoft, Amazon, CrowdStrike, and many others. This competition might hurt the company and its investors in the future.
  2. Though Snowflake might be extremely profitable in the future, the company continues to report massive losses over the past couple of years. Though this is to be expected for a growing company like Snowflake, it will need to turn this around soon as investors have driven the stock price higher and expectations are high. This might hurt the company in the short term.
  3. Snowflake’s stock currently trades at around 300 dollars, which makes it one of the most expensive tech stocks on the market. However, the company has not been living up to some investor’s expectations, causing the stock price to underperform the market during some time periods. This expensive stock price might hurt the company in the short to mid-term.
  4. Snowflake’s stock price has also been extremely volatile over the past couple of months due to missed earnings expectations and other pressures. The stock has been trading from anywhere between 500 dollars to under 200 dollars over the past year. This volatile stock price does not make Snowflake a safe investment option for newer investors looking for strong results.

MY OPINION

I think that Snowflake is a decent long-term investment due to its position as a good growth play, its profitability in the long term, and its position as the largest IPO in the world. However, tough competition, an expensive stock price, a loss-making business, as well as a volatile stock might hurt the company and its investors in the short to mid-term.

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Aaditya Patel

Aaditya Patel

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.