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Why Snowflake Stock Just Melted Down

By Rich Smith – Updated Oct 23, 2020 at 4:02PM

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Barclays thought it was paying Snowflake a compliment. It wasn't.

What happened

So here we are the end of the trading week, and Snowflake (SNOW 1.97%) stock, the hottest of hot IPOs just a month ago, is melting into a puddle, finishing the day down almost 11%. You can probably blame the bankers at Barclays for that.

So what

This morning, Barclays Capital upped its price target on Snowflake to $277 a share. But Snowflake was already selling for more than $297 a share when Barclays raised its target. To hit the new target, Snowflake would have to fall nearly 7%.

Melting snowman

Image source: Getty Images.

Now what

And now it has fallen even more than that. For a growth stock like Snowflake, which nearly tripled its sales over 2018 levels last year, that's certainly discouraging. But when you consider that despite all the growth, Snowflake remains free-cash-flow negative (with cash losses of $126 million), deeply unprofitable ($343 million in GAAP losses over the past year), and is expected by most analysts to remain unprofitable through at least 2025, maybe Barclays is making the right call here.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Snowflake Inc. The Motley Fool has a disclosure policy.

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