2 Reasons to Like SNOW (and 1 Not So Much)

In a sliding market, Snowflake has defied the odds, trading up to $206.89 per share. Its 18.4% gain since November 2024 has outpaced the S&P 500’s 1.9% drop. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is it too late to buy SNOW? Find out in our full research report, it’s free.

Why Does SNOW Stock Spark Debate?

Founded in 2013 by three French engineers who spent decades working for Oracle, Snowflake (NYSE:SNOW) provides a data warehouse-as-a-service in the cloud that allows companies to store large amounts of data and analyze it in real time.

Two Things to Like:

1. Billings Surge, Boosting Cash On Hand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Snowflake’s billings punched in at $770.1 million in Q1, and over the last four quarters, its year-on-year growth averaged 26.5%. This performance was fantastic, indicating robust customer demand. The high level of cash collected from customers also enhances liquidity and provides a solid foundation for future investments and growth.

2. Outstanding Retention Sets the Stage for Huge Gains

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

Snowflake’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 126% in Q1. This means Snowflake would’ve grown its revenue by 26% even if it didn’t win any new customers over the last 12 months.

Despite falling over the last year, Snowflake still has an excellent net retention rate. This data point proves that the company sells useful products, and we can see that its customers are satisfied and increasing usage over time.

One Reason to be Careful:

Operating Losses Sound the Alarms

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

Snowflake’s expensive cost structure has contributed to an average operating margin of negative 40.5% over the last year. This happened because the company spent loads of money to capture market share. As seen in its fast revenue growth, the aggressive strategy has paid off so far, and Wall Street’s estimates suggest the party will continue. We tend to agree and believe the business has a good chance of reaching profitability upon scale.

Final Judgment

Snowflake’s positive characteristics outweigh the negatives, and with its shares beating the market recently, the stock trades at 14.4× forward price-to-sales (or $206.89 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.

Stocks We Like Even More Than Snowflake

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.