Although Snowflake (NYSE:SNOW) is one of the market’s fastest-growing firms, Snowflake stock (NYSE:SNOW) is unprofitable, which is a poor attribute to have in the current volatile environment.
However, despite the dismal short-term performance of Snowflake stock (NYSE:SNOW), this company’s long-term success is dependent on other things. Here’s one long-term tendency that should fuel Snowflake stock outcomes.
Data’s Predictive Capacity Is Revolutionary.
During the epidemic, several firms discovered problems in these traditional methods of making business choices. This error happened because management, employing an unscientific decision-making process, failed to foresee individuals shifting their purchasing habits in reaction to inflation.
Many businesses put off using data-driven decision-making processes before the outbreak. However, COVID-19 has hastened corporations’ need to use these tactics in recent years. According to NewVantage Partners’ 2021 poll, “99% of organizations have invested in data efforts, and 92% said that the spending rate is rising.”
Guess who profits from the rising use of a data-driven approach? You’d be accurate if you guessed Snowflake.
The Platform Assists Businesses in Gaining the Most Value From Data.
The First objective of Snowflake was to eliminate any obstacles that prevented companies from gaining the greatest insights from all accessible data. This barrier elimination is accomplished in two ways by the firm.
To begin, companies must share data to acquire accurate forecast insights. “Data and analytics executives who share data externally create three times more demonstrable economic advantage than those who do not,” according to consultancy behemoth Gartner.
However, privacy policies such as the European Union’s General Data Protection Regulation have created a major impediment for firms exchanging data. Snowflake eliminates this barrier with its “data clean rooms,” which allow many organizations or departments within a single corporation to communicate and merge data safely. This technology guarantees that businesses may exchange data while adhering to privacy and data governance rules.
Second, Snowflake was the first in its sector to build a data marketplace to allow organizations to purchase, trade, or share live data. Joining organizations get access to a variety of data, data services, and applications, including public health and financial statistics, identity resolution services, and software-as-a-service connections.
The data marketplace possibility for the organization is exploding. It published results for the fiscal second quarter of 2023, which ended July 31, 2022, last month. The number of stable edges, which are continuous data-sharing links between two or more Snowflake accounts, has increased 112% year over year. Furthermore, 21% of its client base had at least one stable edge, up from 15% the previous year.
In the Near Term, a Recession Might Hurt Snowflake Stock Price.
It’s difficult to think that this company formerly had a price-to-sales (P/S) ratio of 171 in 2020. Although its value has declined dramatically to a P/S of 33, it is still excessive when compared to the average P/S of the computer processing and cloud services market, which is just over 4.
However, if you’re looking for a long-term investment, there are a few better growth equities to consider over the next three to five years.
Featured Image- Megapixl @ Andreistanescu