Snowflake (SNOW -5.09%) has polarized Wall Street since it went public in late 2020. Some investors adore it for its huge growth potential, but others abhor it because of its wildly expensive valuation.

Unfortunately for Snowflake bulls, the bears have been right so far. Shares have declined 34% over the past three years as the S&P 500 has gained 25%.

But shares have been underperforming the market significantly, even as the data cloud specialist's revenue has soared. Is the bear argument that the stock is too expensive losing some of its luster now that shares are much cheaper than they were a few years ago?

It turns out that the growth stock is just as polarizing today as it was when it first went public.

The bull case

Investors bet on Snowflake stock because they believe these are still the early innings for the data cloud specialist. To this end, management expects its annual revenue to grow from about $2.4 billion over the trailing 12 reported months to $10 billion in about 5 1/2 years.

As speculative as this target might sound, management thinks it's achievable. Its confidence in the aggressive target is based on how many of its existing customers are still early in their journeys of migrating data to Snowflake and unlocking its value.

In addition, Snowflake's platform has proven to attract significant growth in usage (and thus spending since Snowflake operates a usage-based business model) from existing customers. This is evident from the company's high net revenue retention rate of 142%. This metric, which measures growth in spend on its platform from existing customers, highlights how customers are ramping up their usage on the platform over time.

More recently, bulls have been looking to artificial intelligence (AI) as a reason to bet on the stock.

"Generative AI is at the forefront of customer conversations," explained Snowflake CEO Frank Slootman during the company's most recent earnings call. "However, enterprises are also realizing that they cannot have an AI strategy without a data strategy to base it on."

Of course, this is where Snowflake comes in. "We have a head start in this race as the epicenter of highly curated, optimized, and trusted enterprise data," explained Slootman.

The bear case

It doesn't take long to build a bear case against Snowflake stock. A good place to begin is the company's quarterly net losses. It lost about $452 million during the first six months of its current fiscal year, compared to a loss of approximately $389 million in the same six months last fiscal year.

Of course, Snowflake is generating large streams of free cash flow in the meantime. But its significant stock-based compensation expense is weighing on earnings.

This brings us to a second key part of the bear case: valuation. The company's market capitalization of about $52 billion is difficult to comprehend when the underlying business is reporting such hefty losses.

The more recent bear case against the stock is the company's rapidly decelerating revenue growth rates. Snowflake's second quarter revenue for fiscal 2024 rose 37% year over year. This was down from 48% growth in fiscal Q1 and 69% growth in fiscal 2023. 

Overall, deciding whether Snowflake stock is a buy or not remains difficult. If the company's trend of decelerating growth moderates and the company makes meaningful progress toward becoming profitable, the stock might be worth buying. On the other hand, shares could be trading much higher if that happens, making the stock just as polarizing as it is today.

As fun as it is to debate Snowflake stock, investors should remember that it's OK to stay on the sidelines to wait and see if shares ever become cheap enough to make buying the stock a more obvious choice. In the meantime, there are plenty of other investment opportunities to consider.