Why Snowflake Stock Fell 6% in October
Shares of data company Snowflake (NYSE: SNOW) fell 5.7% in October, according to data provided by S&P Global Market Intelligence. Normally a move this small isn't noteworthy. However, it's more significant when compared to the 8% gain for the S&P 500 during the month. Here's why the market seems less bullish on Snowflake stock right now.
To frame the narrative, Snowflake stock is priced with high assumptions of growth -- assumptions that may be getting questioned. Regarding its valuation, the stock traded at around 100 times sales this time last year. The valuation has since dropped because of market conditions. However, its current price-to-sales ratio of 25 is still high.
Snowflake's long-term growth forecast has made some investors believe this premium valuation is warranted. The company is guiding for $10 billion in annual revenue by its fiscal 2029 (which mostly overlaps with calendar 2028) with a top-tier free-cash-flow (FCF) margin of 25%, up from trailing-12-month revenue of $1.6 billion and a FCF margin of 11% in the most recent quarter. And it plans to achieve these long-term numbers by acquiring new customers and from existing customers increasing their spend with higher platform usage.
Source Fool.com
