Should you buy or sell Snowflake stock after solid Q3 results?

On Friday, Snowflake Inc. (NYSE:SNOW) shares pulled back more than 60%, trimming Thursday’s solid post-earnings gains. The company announced its most recent quarterly results Wednesday after markets closed, beating the consensus for analyst expectations.

The company posted FQ3 GAAP EPS of -$0.51, outperforming the consensus for analyst estimates of -$0.61. On the other hand, revenue for the quarter increased by 109.5% from the same quarter a year ago to $334.41 million, exceeding analyst estimates by $28.28 million.

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Snowflakes’ product revenue, which accounts for a majority of its sales, surged 110% from the same quarter in 2020. It expects it to grow by 94%-96% in Q4, and by 103% to 104% for full-year 2022.

Is Snowflake overvalued?

Snowflake shares have pulled back by more than 16% since the 16th of November, trimming this year’s gains to 22.43%. As a result, the stock seems to be performing in line with the S&P 500 index, which is up 22%.

Nonetheless, the stock still trades at a steep P/S ratio of 129.07, making it too expensive for bargain hunters. On the other hand, analysts expect its earnings per share to decline by 48.60% this year before rising again by 41.40% next year.

Therefore, growth investors could also opt for alternatives in the market.

Technically, Snowflake shares seem to be trading within a descending channel formation in the intraday chart. However, Thursday’s spike helped the stock to recover from oversold conditions pushing it towards the trendline resistance.

Therefore investors could target extended rebounds at about $359.70, or higher at $398.51, while $311.40 and $289.84 are crucial support zones.

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