This May, the market saw some rather impressive downside volatility. The market saw significant downside volatility in May, which led to a sharp drop in the stock valuations for many of its top growth stocks. However, Snowflake (SNOW), was not spared from this madness.

SNOW shares have seen a nice rebound since the short-term selloff. The shares of this cloud computing giant have rebounded by 70% from just four months prior. Long-term investors that are optimistic about this company’s future prospects will continue to reap the rewards of a buy/hold strategy.

Many investors are unsure if this momentum will continue. Growth stocks are nearly all valued at very high levels currently. A single catalyst can be the one that makes the difference. At least that’s the belief of bears.

SNOW stock is a good investment for many reasons. Let’s look into some of the reasons that investors may continue to be bullish about this stock. (See Snowflake stock charts on TipRanks)

SNOW Stock: Growth Play with Excellent Momentum

Since its gloomy mid-May performance, SNOW has recovered by 70% over these last four months. There are a variety of factors that have contributed to this dramatic rise. Many investors believe this buy activity is the result of an incline toward bullish sentiment over the long-term. However, cloud computing stocks have volatility.

SNOW stock’s momentum appears broadly bullish at this point. This is a good thing for investors who’ve been holding this stock for a while. However, those who missed the dip can find these gains to be quite excruciating. It may prove difficult to locate another entry point moving forward.

Recent strong earnings have pushed this stock higher. Cloud computing company has experienced a recovery in its top line growth and is expecting to see a return to profitability. Snowflake has regained its $300 per share level. This level may be hard to break down for some time if the momentum continues.

But momentum is always in the other direction. SNOW stock bulls should be aware of what has happened in the past during negative momentum rallies. It is an extremely-valued stock that has greater potential for fall than value investments in a bear markets. Investors should remember that such stocks can be held in a portfolio with diversified holdings.

However, Snowflake has long-term potential and there are reasons to be positive. The stock has the potential to outperform in an environment of positive momentum. Snowflake has been praised by analysts for being more flexible and cost-effective than other companies. It’s evident that all investors have the same analysis.

Strong Second Quarter Earnings 

As mentioned, Snowflake’s recent earnings really were quite strong. Snowflake’s earnings for the second quarter showed triple-digit growth in revenue to $255 million. The company reported revenue growth of 104% in its third quarter, compared to 103% the prior quarter. This brought the total earnings up to $272million.

This means that this company doesn’t just exceed earnings expectations but is also accelerating its earnings. It’s quite remarkable.

While analysts had predicted strong revenue growth in the future, nothing has been achieved on this magnitude. SNOW stock’s earnings are worthy of gold stars from a bottom-line perspective.

But, growth comes at a cost. Snowflake isn’t yet profitable and has been unable to meet its financial goals in the past. The company’s loss this quarter was $0.64 per share compared to analyst estimates of $0.15. This is a disappointing result, but it can be expected that the company will see higher market share and revenue growth over time.

The stock isn’t being bought by investors because it’s currently profitable. Instead, investors are banking on Snowflake to be able capture more market shares over the long-term.

Analysts’ Take on SNOW Stock

TipRanks’ analyst rating suggests that Snowflake is a Moderate Buy. Nine Buy recommendations are available and 10 Hold recommendations. 

The average Snowflake price target is $317.80. An analyst can set price targets ranging from as low as $275 per stock to as high at $375 per. 

Bottom Line

Looking at the numbers, SNOW stock is one that is certainly enticing. This stock continues to be a highly-growth stock and is exceeding its top-line targets. Investors may now demand that the company transition to profitability. This scenario could lead to some potential downside.

As long as investors are valuing growth more than earnings, momentum in this stock will continue to be bullish. It is difficult to find these kinds of growth rates in today’s stock market. Snowflake remains one of the best growth stocks for investors today, which is why it’s still a top choice.

Disclosure: Chris MacDonald had no position at the time this article was published.

Disclaimer: Information in this article does not necessarily reflect those of TipRanks. TipRanks cannot guarantee the reliability, completeness or accuracy of any information. This article is not intended to be interpreted as an offer or recommendation for the purchase or sale of securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks, its affiliates, disclaim any liability or responsibility in relation to the article’s content. You are responsible for your actions based upon the articles. TipRanks’ or any affiliates does not endorse this link. Performance in the past is no guarantee of future performance, price or results.