Should I Buy Snowflake (SNOW)? Finance YouTuber Analysis

The YouTuber suggests hiding out in software and services names like Snowflake, as investors realize AI won't replace their services all at once. These stocks have rebounded from oversold conditions and could have further upside, especially as inflation reports moderate and Fed rate hike fears ease.

“The software and services names could have further to rebound. So you might hide out in some of those names like Data Dog, Snowflake, Palanteer, and the Cyber Security Group.”

The YouTuber would consider picking up shares of Snowflake, placing it among the leaders in the software industry alongside ServiceNow and Shopify. These companies are seen as having competitive advantages and relative growth despite AI threats, justifying their higher valuations compared to other software firms.

“In these, I hold positions in both Service Now and Shopify, but would also consider picking up shares of Snowflake.”

Snowflake, a cloud data platform, helps enterprises manage massive datasets generated by the AI era. While shares are up modestly, the company's expected 28% revenue growth positions it for further upside as AI adoption accelerates.

“The shares are only up 8% over the past year, but again that 28% revenue growth expected this year can keep going and take this one higher as well.”

The YouTuber is buying Snowflake shares, countering fears that AI will negatively impact enterprise software demand. They contend that software companies can achieve stronger growth by integrating AI agents, making the recent tech selloff an opportune time to buy.

“Adjusting stock valuations for revenue growth. I'm buying shares of Salesforce and Snowflake, ticker SN, on this theme.”

The analyst suggests buying Snowflake due to its high growth rate, which justifies its higher valuation compared to other enterprise software companies. While it's more expensive on a price-to-earnings to growth basis, its significant sales and earnings growth potential make it an attractive option, especially given its recent discount.

“I do like Snowflake on that higher growth. I would probably go with some shares of ser of Salesforce, ticker CRM, and Snowflake, ticker C, SN right here, be able to play off of this uh this recent discount.”

The YouTuber is holding his shares of Snowflake for long-term growth, noting its market leadership in data warehousing and its importance in the AI revolution. He expects sales to continue growing at over 20% and would be a buyer if the stock drops below $135 per share, as it still trades at about 11 times forecasted sales.

“I'm just holding my shares now, but would be a buyer at anything under 135 per share.”

The YouTuber identifies Snowflake as a buy, despite it being the riskiest, due to its significant growth potential in data management and analysis, a key component of the AI revolution. He notes its market leadership in data warehousing (21% share) and strong expected revenue growth (25% this year, 23% next), with improving non-GAAP profitability.

“Snowflake, ticker SN, is probably the riskiest of the group, but has the growth to go well beyond its $ 37 billion market size.”

The YouTuber views Snowflake as a buying opportunity after a market overreaction to its strong earnings report, which caused a stock drop. He emphasizes its leadership in data analysis and management, crucial for AI software, and its impressive revenue growth (30-38% year-over-year) coupled with improving operating margins. He is buying on significant dips and adding quarterly, expecting a rebound and continued earnings growth.

“I think the perfect example of what is wrong with the market right now investor expectations just getting out way ahead of themselves even after a very strong earnings report very strong growth reported in its uh prior quarter earnings the stock dropped Like a Rock that's when I started buying shares here because I think that growth is going to continue.”

The YouTuber suggests Snowflake could be a long-term buy, especially with rumors of its acquisition of Reka AI to expand its generative AI capabilities. While Q1 earnings growth is marginal, the company is expected to maintain 20%+ annual revenue growth, which should support shares long-term.

“but the company is expected to keep that growing Revenue at a 20% plus annual pace which should help keep supporting the shares long term.”

The YouTuber includes Snowflake in his growth stock theme, noting its benefit from higher interest rates due to interest income on its cash holdings. He expects its valuation to further improve as overall interest rates decline, boosting growth stocks.

“I also like Palantir Technologies here pltr as well as snowflake ticker snow in that gross stock theme we recently talked about snowflake actually benefiting from higher interest rates as well just on all the cash it holds on its balance sheet.”

The YouTuber highlights Snowflake as benefiting from higher interest rates due to its substantial cash reserves and cash flow positive status. The company reported $73 million in interest income last quarter, which accounted for more than half of its earnings per share over the last year, indicating a significant boost from its cash holdings.

“That 150 million in interest income booked over this last year that that's added 45 cents per share in income that's more than half the company's 7070 cents per share profit.”

The YouTuber is focusing on Snowflake, seeing AI software and cloud services as the next big boom in the AI trend, contrasting them with expensive chipmakers like Nvidia. He views the recent 19% pullback as an opportunity to buy into companies that will meet the demand for AI software.

“While the chipmakers like Nvidia remain extremely expensive that next big print and AI will be in the cloud services and the software stocks.”

The YouTuber sold a portion of their Snowflake position, taking a 40% profit, because they believe the stock has risen significantly and has the potential to retrace back to their original target zone. They are reducing risk in anticipation of a correction.

“Wir sehen hier aber das Potenzial, dass er noch mal deutlich zurückkommt in unsere Zielzone. Deswegen sind wir hier vorsichtig und nehmen die Chips vom Board runter.”

The YouTuber identifies Snowflake as a company with a strong business model in data warehousing for AI, exhibiting good free cash flow and high gross margins. However, despite aggressive assumptions for future growth and margin expansion, the current valuation is considered too high, with the analysis projecting only a 3% return over 10 years, making it an unattractive investment at present.

“Based on these assumptions above, I'd come out with about 3%. So, it all worked itself out in that regard. Guys, for me, based on what analysts are saying, I'm looking at going, it's still a hard pill for me to swallow.”

The YouTuber is avoiding Snowflake due to its high valuation, trading at approximately 67.5 times free cash flow for the current year, despite strong revenue growth and net revenue retention. While acknowledging its positive earnings report and AI tailwinds, he considers the stock 'very, very expensive' at its current price.

“So, personally, I still think that Snowflake stock is very, very expensive and I'm not necessarily interested in it at this price.”

The YouTuber believes Snowflake is massively overvalued, trading at 93 times free cash flow and 16 times sales, despite 30% annual revenue growth. He highlights concerns about stagnant cash flows and significant stock-based compensation diluting shareholders, making it an unattractive investment despite low AI disruption risk.

“However, Snowflake is still trading for a price to free cash flow of 93 and a price to sales ratio of 16, which are very high multiples still.”

The analyst suggests Snowflake is a buy for long-term investors who believe its revenue growth can remain above 20% annually for the next 10 years. This is based on strong recent earnings, re-accelerating revenue growth driven by new AI products (Coco), and a usage-based model that benefits from increased AI adoption. While the valuation is high, a reverse DCF analysis indicates the current price is justified if growth targets are met, and analysts have historically underestimated its growth.

“If you believe from years 4 through 7, which would really be 2030 to say 2036, if you believe that they can have revenue growth of over 20%, well then today's stock price makes all the sense in the world.”

The YouTuber places Snowflake in the 'robust' category but expresses caution, similar to Salesforce. While it holds data, the functions performed on that data are easier for AI to replicate, making its valuation less compelling.

“Snowflake in particular has the data but the functions that are run on that data that's a little bit easier to replicate. So I would put it in a similar bucket to Salesforce.”