Risk/Reward Rating: Negative
Snowflake and its Data Cloud offering have been in hypergrowth mode in recent years with sales growing 174% in 2019, 124% in 2020, and a projected 93% in 2021 (the company is currently in its fiscal year 2022 which ends January 31, 2022). Snowflake affirmed the current 93% growth expectation for the year when it reported Q2 2022 earnings the evening of August 25, 2021. When companies are in a hypergrowth stage, valuations often become stretched creating extreme challenges for investors.
Business Performance and Projections
At the current quarterly run rate of new business, the incredible revenue growth in recent years is set to decelerate sharply over the coming years which brings the valuation of the company into focus.
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