Snowflake's (SNOW -0.50%) software is making it possible for businesses and institutions to combine and analyze information gathered through any or all of Amazon, Microsoft, and Alphabet's competing cloud infrastructure services. The data specialist has been growing sales at an impressive clip, but its stock has plummeted as investors have moved away from companies with growth-dependent valuations.

Are shares worth buying at today's prices? Read on to see why two Motley Fool contributors come down on different sides of this software stock debate. 

Bull case: Snowflake's growth outlook is very promising

Keith NoonanSnowflake is helping organizations generate actionable insights from a broad range of data sources. These days, most enterprises and large institutions use applications and services from multiple cloud infrastructure providers. Basing analytics on individual queries from walled-off data sources simply isn't sensible. Snowflake is providing a best-in-class solution for a service that looks primed for huge demand growth over the long term, and strong momentum for the business reflects the importance and quality of its services.

The company ended last quarter with 6,332 customers, up approximately 40% compared to the prior-year period, and large customers are making increased use of its services. Rather than a subscription-based model, Snowflake makes most of its money by charging customers based on usage, and this setup has both given clients increased flexibility and translated to stellar spending growth.

Snowflake posted a net-revenue retention rate of 174% in the first quarter, which means customers increased their spending 74% year over year, and rates that high are virtually unheard of. Data services will become increasingly crucial for large organizations, and the business has big growth opportunities as it adds new customers and benefits from ramping usage. 

Snowflake stock now trades down roughly 57% from market close on the day of its initial public offering in September 2020. Year to date, the shares are down roughly 48.5%. The market's valuation criteria have shifted in a much more risk-averse direction amid macroeconomic pressures, but the business has continued to serve up strong performance, and there's still an attractive long-term demand outlook for its services. 

Bear case: How much success is already priced in?

Jamie Louko: There are lots of reasons to believe that Snowflake could see rapid adoption from here. As mentioned above, this company is very innovative and has seen astounding adoption, and the future looks very bright. However, a lot of Snowflake's future success could already be priced into the stock. 

Snowflake believes it could achieve a 25% adjusted free cash flow margin and $10 billion in annual product revenue by its 2029 fiscal year (or calendar year 2028). That would imply $2.5 billion in annual adjusted free cash flow by fiscal 2029.

The company's current market cap is $55 billion, meaning Snowflake is trading at 22 times fiscal year 2029 free cash flow -- an absurdly high valuation. Comparatively, other tech stocks like Apple and Alphabet are trading around 25 times current free cash flow.

What does that mean for Snowflake? If the company achieves these growth projections, and in 2028 it trades at 22 times current free cash flow (all else staying equal), the stock would return 0% from today. In other words, investors are already pricing in extreme success for Snowflake, and even if it does achieve its adjusted free cash flow projection, there's the potential for the stock to stay flat over the next six years.

To make any sort of return on investment in Snowflake over the next six years, the company would either have to blow its current (and already ambitious) growth projections out of the water or trade at a substantial premium in the fiscal year 2029, both of which should not be expected.

Is it time to buy Snowflake?

Amid the current market backdrop shaped by high inflation and rising interest rates, Snowflake stock isn't for the faint of heart. The company trades at a heavily forward-looking valuation, and it will have to deliver strong performance in order to live up to and exceed its current share price. For risk-tolerant investors, recent market volatility for growth stocks may have created an opportunity to build a discounted position in a revolutionary/powerful/influential company at attractive levels, but you should keep your personal tolerance for volatility in mind before making a big buy.