Snowflake Share Price Forecast February 2022 – Time to Buy SNOW?
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Shares of cloud computing-based data warehousing company based Snowflake (NYSE: SNOW) are in the green today after closing at $311.11 as of February 10th (19:59 EST). Snowflake went public in late 2020 with incredible hype. It got major backing from Berkshire Hathaway, which bought $250 million worth of Snowflake shares at the IPO price. Snowflake shares continue to trade at a premium to most company shares in the market more than a year later.
Snowflake – Technical Analysis
In the financial statement released by Snowflake, the market cap was indicated to be $95.293 billion with total assets worth $6.163 billion. Revenue for 2020 for $592.05 million with a profit margin of -91.06% compared to $264.75 million in 2019.
Oscillators such as Relative Strength Index (14)(57.39), Stochastic %K (14, 3, 3)(88.45), Commodity Channel Index (20)(156.09), Average Directional Index (14)(32.96) and Awesome Oscillator(−1.89) are neutral. Moving averages such as Exponential Moving Average (10)(288.33), Simple Moving Average (10)(281.92), Exponential Moving Average (20)(287.66), Simple Moving Average (20)(277.82) and Exponential Moving Average (30)(293.67) are indicating a buy action.
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Recent Developments
The internet plays a huge part in our lives and has penetrated just about everything. Companies that best use internet data get a competitive edge over their competitors. But this can be a challenging task that Snowflake aims to solve. The platform offers companies a comprehensive platform to store, manage, and share data. Their clients do not have to invest in physical equipment, software to install, or upgrades.
Snowflake has been producing growth metrics among the best of any company on the stock market. It is growing revenue at a triple-figure rate, up 110% year over year in its most recent report for the fiscal 2022 third quarter. The company continues to grow its customer base, which now totals 5,416 businesses as of Oct. 31 and increased 52% year over year. 148 of Snowflake’s clients have already spent $1 million or more on Snowflake’s platform in the past year while High-value users increased by 128%.
Snowflake’s dollar-based net revenue retention rate which is a measure of existing customers’ spending growth, came in at 173%. Customers are increasing their spending on the platform. The company is currently crossing a stage where revenue growth is beginning to outpace expenses. Adjusted free-cash-flow margin went from negative 75% in fiscal 2020, negative 12% in fiscal 2021, and positive 6% through the first three quarters in this year.
Should You Buy SNOW Shares?
Investors should be aware that the company’s rapid growth and improving financials have earned a hefty premium. Its P/S ratio is the highest on Wall Street since its debut. Snowflake shares still command a P/S ratio of 85 even though they are trading near their lowest valuation since its IPO. The company’s market cap is nearly $90 billion despite generating just above $1 billion of revenue in the past 12 months.
This has put investors in confusion as to how to interpret the company’s valuation. It seems like a lot of the company’s near-term potential has already been priced into the share price. While the majority of growth and technology stocks have undergone a substantial sell-off, Snowflake’s premium will continue.
Investors can alleviate the doubt that comes with “paying up” for a quality business if they take a long-term investment approach. This will give the company enough time to increase its value over the next few years. But they should also consider the risk present in the stock’s short-term volatility.
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