Bill 'Latency Lord' Brennan
Fundamental Growth Investor, B2B/Sector Leaders & Picks-and-Shovels
Snowflake has not solved its stock-compensation problem just because the stock jumped, and its valuation still is not justified by any visible path to real profits. SBC still eats 29% of revenue, GAAP EBIT margin is -24%, and future GAAP earnings remain wildly uncertain. @Sam_Badawi argues the 38% jump on reaccelerating growth shows Snowflake growing out of its SBC problem, but the market simply does not care about the bottom line right now. It remains speculative and could work. x.comÂ
Snowflake's growth no longer justifies its spending: revenue is growing 33% while GAAP EBIT is still -24% and improving only slowly. If GAAP results do not turn positive before growth inevitably decelerates within a year or two, it could trade at 5x forward revenue. At an $80B market cap after a 33% after-hours jump, roughly ServiceNow's size, there is no reason to add or keep holding, though the stock could eventually work. x.comÂ
Snowflake is still not GAAP profitable at a $125 billion valuation because it keeps chasing top-line growth at any cost. x.comÂ
Snowflake is too expensive at 55x FY2027 free cash flow because stock-based compensation dwarfs that cash flow. FY2027 Q1 showed $265.5M of non-GAAP adjusted FCF against $433.7M of SBC, or 163% of FCF; trailing-12-month FCF is $1.2B versus $1.6B of SBC. That much dilution for 30% revenue growth makes it uninvestable when better stocks exist: Reddit's SBC is 21% of FCF, it grows twice as fast, and its non-GAAP net margin is 42% versus Snowflake's 10.6%. x.com x.com x.com x.comÂ
Snowflake's revenue growth has far outpaced its stock return, leaving a valuation disconnect. Revenue rose 363% over five years to $1.55 billion quarterly while the shares gained just 19%; that disparity looks hard to justify. x.comÂ
Snowflake's bear case keeps dwindling, but the stock is not a buy at these levels. Stock-based compensation has now fallen as a percentage of revenue for six consecutive quarters. x.comÂ
Snowflake needs to stop leaning on adjusted EPS, deliver GAAP profit and curb its high stock-based-compensation dilution. x.comÂ
Snowflake is showing real AI-driven sales acceleration, and analysts questioning its buybacks and 2028 earnings guide misread it. Net revenue retention is 126%, @WisemanCap notes AI workloads carry higher gross margins than traditional ones, and management sees a $460B TAM by 2031. SBC fell from 50% of revenue to 29% last quarter and could be about 20% in a year; at under $90B EV it trades at 9-10x next year's revenue. Not cheap, but top line and margins drive free cash flow. x.com x.com x.com … Show more
Snowflake's valuation looks full after more than doubling since May on an AI inflection story, given five years of promised inflections that didn't materialize. Stock-based compensation remains heavy at $1.6B against FY2026 revenue of $4.7B, though dilution has been kept in check lately. At about 23x EV/revenue, or 19x forward, it sits near the top of its 2-3 year range. A Databricks IPO could make investors see Snowflake as old relic tech. x.com x.comÂ
Snowflake's valuation is even more detached now than in 2021: estimates are lower, the risk-free rate is higher, and the stock price is the same. Even with 33% growth implying $11-12B of revenue a year out, a $130B value against about $200M of profit makes little sense; $20B of profit far in the future is worth about $2B today. With the 10-year at 4.8%, earnings ten years out are worth only 62% of their value under zero rates. Per 2021 forecasts it should have had over $20B in revenue this year. … Show more
Snowflake remains headed to $390 a share by end-2027 because investors have yet to fully realize it benefits from AI rather than being disrupted by it. It guides for 31% growth and roughly $1.5B of free cash flow, moving toward $2B a year. Buying before the market latches onto that narrative captures the easy money, while waiting for market clues means trailing the market. x.comÂ
Snowflake now looks really expensive against a $180-200 valuation, even though the business remains strong. It is growing around 30% and pushing hard into AI with its cloud data solutions, which could drive strong growth for years. x.comÂ
