This Recent Decline in SNOW Stock Offers Up a Buying Opportunity

Snowflake symbol and logo at the company corporate headquarters in Silicon Valley. SNOW stock.

Source: Sundry Photography / Shutterstock

Snowflake (NYSE:SNOW) stock hasn’t quite hit new lows yet, but at $187, it is near the bottom end of its 52-week range of $164 to $405.

There’s an avalanche of selling in the technology sector right now. Following Netflix’s (NASDAQ:NFLX) dour earnings report, speculative growth companies have tumbled. A bunch of leading names have slid to fresh new 52-week lows.

Down nearly 15% in the last month, the latest decline in Snowflake appears to be primarily driven by broader market factors, such as the selling in tech stocks and the rise in interest rates. There also was a concrete negative development when Goldman Sachs analyst Kash Rangan cut his price target from $335 to $289 per share.

Despite the falling near-term outlook, the underlying fundamentals remain upbeat. Analysts see Snowflake growing revenues 67%, 56% and 51% over each of the next three years, respectively.

Those are not the numbers of a company with any core problems as far as its operating business goes. Analysts also see the company reaching profitability this year and starting to generate meaningful positive EPS over the next 24 months.

It’s true that the tech industry is facing a major slowdown. Instead of enjoying unprecedented demand with everyone working and learning at home, now the trend has gone the other way. People aren’t spending every last minute online, and marginal demand for digital services is dropping.

A lot of tech companies are going to have a difficult 2022. What’s different with Snowflake is twofold. One, its data storage architecture is arguably the best in the industry and so it can take market share even if the overall pie stops growing for a bit. Two, data storage is less of a trendy product than many others.

As the overall amount of data and digital products grows, demand for the category increases. Snowflake isn’t nearly as tied to short-term trends in things such as e-commerce or online streaming as other companies.

Now, it won’t necessarily be straight back up from here for SNOW stock. The valuation on the name is still fairly generous, even with shares near 52-week lows.

As our Chris Tyler recently warned, the company’s technical picture doesn’t look too great at the moment either. Snowflake could certainly make lower lows before starting to recover. Over the longer term, however, this is one of the stronger candidates for a tech recovery trade.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/this-recent-decline-in-snow-stock-offers-up-a-buying-opportunity/.

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