Don't let the frosty name fool you -- Snowflake (SNOW -0.97%) has been a hot growth stock lately.  Shares of the cloud services company leapt higher following the release of its latest quarterly results on Aug. 24. The results indicated a still-blistering rate of revenue growth, which should continue at a high-double-digit clip.

But one quarter does not a stock make, and in fact, Snowflake's share price has melted since the company's splashy late-2020 initial public offering (IPO). If you'd put $10,000 into shares at its opening price, you'd have quite a bit less than that now. Let's explore the dynamic behind that decline and figure out whether the stock is a buy.

A flaky stock?

Snowflake has the distinction of being the largest software industry IPO in history. In coming to the stock market -- which included a $250 million IPO buy-in from none other than the once-tech-averse Warren Buffett, via his investment vehicle Berkshire Hathaway -- the company raised a staggering $4 billion.

As far as the resulting shares are concerned, though, Snowflake couldn't sustain that level of popularity. The stock's opening price on its first day of trading was $245 per share. As of this writing, it changes hands at just over $186. So if you were one of the first investors to snap it up on the exchange, that $10,000 would have bought you 40 shares (with $200 in change). These days, that stake is worth only $7,457, for a loss of 24%.

To an extent, Snowflake is being punished for simply being a tech growth stock in an environment where many investors are shunning such companies. Inflation and the war in Ukraine are shaking up economies throughout the world, and in that kind of atmosphere, many exit more speculative stocks in favor of defensive tickers.

So, no matter the underlying strength of Snowflake's business model -- which in my view is solid -- and that still-smoking revenue growth, it's still consistently losing on the bottom line (It remains at an early-ish stage of its development). The favored defensive stocks tend to regularly land in the black, not leak into the red.

Snowflake has actually done rather well in terms of fundamentals across its brief life as a publicly traded company. In its recently reported second quarter of fiscal 2023, it once again managed to expand its top line at a high double-digit rate, up the line item rose by 83% year over year to more than $497 million. This was almost $30 million higher than the average analyst estimate. How's that for a convincing beat?

The story was different on the bottom line, as the almost $223 million net loss was notably worse than analyst projections. That isn't a trivial amount, but then again, it isn't significantly deeper than the near-$190 million shortfall of the same period of fiscal 2022.

Let's remember, though, that the name of the game with young tech companies is to build a customer base and pile up revenue, booking losses on the way.

Besides, IPO super-success has its privileges. Snowflake still has plenty of financial firepower left in its arsenal. At the end of the quarter, its cash and short-term investments totaled just under $4 billion, only slightly lower than the $4.1 billion-plus from a year ago. That indicates good management of precious assets and demonstrates that the company can keep absorbing bottom-line deficits if it needs to.

A solid operator

Meanwhile, Snowflake has a compelling business model that's showing to be durable in these challenging times. It charges clients by usage, rather than utilizing the in-fashion subscription model. Businesses that want to cut their cloud expenses can therefore pare back on how much cloud space they utilize at any given time, rather than committing to a subscription that could be expensive.

The proof that clients like this model and the fact it's got organic growth baked into it lies in the revenue retention rate. This rate -- which measures how much the average Snowflake client spends on the company's services over time -- clocked in at an impressive 171% in the second quarter. This means longer-term customers collectively upped their spend by 71% over the course of a year. Even the most established tech services providers would be envious of that.

Going forward, both the company and the analysts tracking it believe plenty more growth is in store for the product revenue that constitutes the bulk of Snowflake's top line. In fact, the company raised its guidance for fiscal 2023, albeit modestly. Its newly anticipated $1.90 billion to almost $1.92 billion range would represent at least a 67% improvement over the previous fiscal year's tally.

With the top line improving so quickly, those bottom-line losses should flip into positive territory sooner rather than later. Then we should really see sentiment improve on Snowflake stock. The cloud is a very good place to be, and this company is a worthy provider in that realm. I would definitely consider loading up on it for any portfolio.