Is Snowflake a Millionaire Maker Stock?

Data is the lifeblood of many organizations, driving everything from marketing strategies to critical financial decisions. However, the sheer amount of customer, merchant, and market information available to businesses is an increasing challenge to organize and access.

One player that has emerged to meet that demand is Snowflake (NYSE: SNOW). Many organizations have data that is fragmented and siloed across many platforms and segments. Snowflake creates cloud-based data warehouses that aggregate the information, organize it, and present it in a way that can be ingested by a company’s systems.

The company had its much-anticipated IPO in 2020, and the stock shot up to $387 per share for a brief moment in time.

SNOW then peaked again in late 2021, nearly reaching $400 per share, but the share price subsequently plummeted and struggled over the last few years. Snowflake shares are down 38% year-to-date, well below their former highs.

The good news is the company notched impressive growth last quarter, beating revenues and earnings estimates. That’s in part because Snowflake has just begun to gain traction with its AI use cases, just when the stock is near an all-time low. So, can a strong case be made that Snowflake will make millionaires of new investors?

Why Did Snowflake Stock Drop?

In the second quarter of fiscal 2025, Snowflake’s revenue of $829.3 million was up 30% year-over-year. It also marginally beat analysts’ estimates by 2.13%.

Snowflake grew its customer base by 21%, up from 8,456 last year to 10,249 in the fiscal second quarter. Approximately 736 of these customers are in the Forbes Global 2000, and 510 of the company’s customers contributed trailing 12-month product revenue that eclipsed $1 million.

Despite rising revenues and an influx of customers, Snowflake’s net loss deepened by almost 40%, up from $226.9 million last year to $316.9 in fiscal Q2. Still, the data company smashed earnings estimates by 13.5%.

On the balance sheet, Snowflake sits pretty with $1.3 billion in cash and cash equivalents at the end of the quarter, and free cash flow of $58 million.

“Snowflake delivered another strong quarter, surpassing the high end of our Q2 product revenue guidance and, as a result, we’re raising our product revenue guidance for the year,” said Sridhar Ramaswamy, CEO of Snowflake. “The quarter was hallmarked by innovation and product delivery, and great traction in the early stages of our new AI products.”

Is It Time for Snowflake Stock to Pop?

The company’s AI potential is one of the reasons to believe that Snowflake stock could be due for a rally. Snowflake’s warehouses are designed to operate on the infrastructure of the major cloud providers, such as Amazon Web Services or Microsoft Azure.

The data firm does not sell subscription plans per se but instead charges its customers just for the storage they require. That ease of integration has been one of the main reasons Snowflake has gained traction in an increasingly cloud-based business environment.

While the company’s original model is to store data and collate it for an organization, there is a strong AI use case for the company’s warehouses. The massive data repositories are a highly effective way to feed and train artificial intelligence models.

Many companies have wanted to build their own AI models that can perform specific internal functions, but they don’t have the datasets to fuel them. According to a collaborative study by MIT Technology Review Insights and Snowflake, 78% of today’s businesses don’t have the data foundation to support generative AI models.

Snowflake’s products provide a huge, diverse set of data that AI can pull from. However, even though AI has been one of the driving forces behind the stock market’s rise this year, investors have still been reluctant to buy in on SNOW.

Analysts’ Rate Snowflake Stock a Buy

Investors have been concerned about the company’s revenue slowdown and its continued unprofitability but Wall Street analysts are still firmly in Snowflake’s corner. Out of 45 analysts who have weighed in on SNOW, 31 assess Snowflake to be a Buy.

There are six analysts who forecast that Snowflake shares will outperform the market in the coming year, and the highest price target for the stock is $220 per share, which would translate to a remarkable 87.5% increase from where the stock currently trades.

The average price target for SNOW is $165.89 per share, which would still be a 41.4% increase over the next 12 months. There are 13 Hold ratings and one Sell rating on the stock. The lowest forecast is for Snowflake shares to fall by 10.5% in the coming year.

Is Snowflake Stock Undervalued?

While the analysts ratings are largely positive, the company’s price-to-sales ratio of 11.9 makes SNOW look expensive. By comparison, software company Oracle has a P/S value of 9.2 and is highly profitable while paying shareholders a dividend. Snowflake is neither profitable nor a company of interest to dividend seekers.

However, the company has rewarded its shareholders by repurchasing its stock. Last year, Snowflake laid out plans to buy back $2 billion in its common stock. At the end of fiscal Q2, roughly $491.9 million remained from that initial plan.

Snowflake has forged ahead with plans to buy an additional $2.5 billion in stock and extended the expiration date of the stock repurchase program to early 2027.

Is Snowflake Stock a Buy, Sell, or Hold?

Snowflake builds data repositories for companies, but there has been concern that the demand for that product isn’t as strong as it was a few years ago. The company’s revenue has plateaued in recent months. It’s a big concern when a growth firm focuses instead on increasing efficiencies and maximizing margins.

Snowflake has not been able to accomplish those feats, instead falling further into the realm of losses but compelling use cases for the company’s products do exist, especially as an AI trainer.

Analysts a whole have rated the stock as oversold but a discounted cash flow forecast paints a more neutral picture with fair value sitting at $118 per share.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.