Is Snowflake a Good Investment?

OVERVIEW

Snowflake Incorporation is a company based in the United States. The company offers cloud-based services for companies around the world. Through the Snowflake cloud, companies of all sizes can consolidate and analyze data. The company was founded in 2012.

Why You Should?

  1. Snowflake is a great growth stock in an investors portfolio. As the company continues to further develop its products and as investors will return to investing in these “super-growth” stocks, the company’s stock price will continue to rise. This will benefit the company and its investors.
  2. The COVID-19 pandemic has benefited the company as businesses around the world look for ways to better extract and analyze information from data. Furthermore, using the services that Snowflake provides is one of the many ways of how companies can modernize and digitize their businesses for the future as well. This will benefit the company and its investors.
  3. Snowflake is part of a growing industry. The cloud and SaaS (software as a service) industries are going to be hundreds of billions of dollars (if not trillions of dollars) in the future due to the reasons mentioned above. This will benefit the company and its investors in the future.

Why You Should Not?

  1. Snowflake has to deal with a lot of competition in this industry. Some of these companies include Amazon, Google, IBM, and many others as well. This competition has hurt the company in the past and might continue to hurt the company and its inventors in the future as well.
  2. Snowflake has an extremely overvalued stock. The company is valued at over 52 billion dollars at around 240 dollars a stock. This is for a company which is not the best cloud company in the world and a company that has never turned a profit. This causes more volatility in the company’s stock price and will hurt the company and its investors in the future.
  3. The stock market has fallen (especially the technology sector) as interest rates have risen over the past couple of weeks. This is because large investors are selling these stocks in favor for more stable bonds. This might hurt the company and its investors in the short to mid-term as this technology stock glut continues.
  4. The company has seen rising revenues over the past couple of years. However, the company has also reported rising losses over the same time period. This has hurt the company as it is finding ways to turn a profit (or reduce losses) and its investors. In the financial year of 2021, the company reported revenues of around 592 million but a massive loss of around 539 million. In the financial year of 2020, the company reported revenues of around 264.75 million but another massive loss of around 348 million.

MY OPINION

I think that investors should hold off on investing in a company like Snowflake at the moment. This is because of tough competition, an overvalued stock price, rising interest rates, as well as lackluster profits. However, the company is a good growth opportunity for long-term investors, positive impacts from the COVID-19 pandemic, and its position in a growing industry will benefit the company.

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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.