Snowflake is Sinking After Announcing $2 Billion Debt Plan: Should Investors Be Concerned?

Shares of Snowflake Inc. (SNOW) are down roughly 2% Thursday morning, making it a 6% loss over the past month. The latest bit of downward pressure can be attributed to the company’s announcement that it will be raising $2 billion in debt.

The plan involves two separate $1 billion Senior Convertible Notes, one of which will be due in 2027, and the other in 2029. The repayment terms allow for either cash or shares when these notes are due, and interest rates still aren’t set in stone.

The cloud computing company says it will use $575 million of that capital to initiate a share repurchasing program. The rest will be allocated toward acquisitions and/or strategic investments in complementary businesses or technologies.

What exactly Snowflake intends to invest in remains to be seen, as the company kept things fairly vague. However, it’s clear that new CEO Sridhar Ramaswamy has his sights set on pushing forth in the AI arms race, seeing this as an opportunity to rejuvenate the stock.

SNOW has fallen more than 43% so far this year and has shed 55% of its value since it first went public back in 2020. It peaked in November of 2021 and has fallen more than 71% since.

While it got a lift from the announcement of a Nvidia partnership back in the summer of 2023, that positive news cycle was short-lived. The former Google executive and Neeva CEO, who just took the helm earlier this year, is looking to rekindle that flame by investing more heavily in emerging AI technology.

In the meantime, you might be wondering what all this news means for current investors, or if this presents a good buying opportunity for a company that’s clearly focused on pulling itself out of a hole. After all, this is the lowest SNOW has fallen in its publicly traded history.

We’ve taken a look at SNOW in the VectorVest stock software and found 3 reasons it might be time to sell this stock if you haven’t already.

SNOW Has Poor Upside Potential, Safety, and Timing?

VectorVest is a proprietary stock rating system that simplifies your trading strategy by delivering clear, actionable insights in just 3 ratings. This helps you win more trades with less work, eliminating emotion and human error from your decision-making.

These ratings are relative value (RV), relative safety (RS), and relative timing (RT). each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation.?

It gets even better, though. You’re given a buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for SNOW:

• Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a far superior indicator than the typical comparison of price to value alone. SNOW has a poor RV rating of 0.75. Even after the losses over the past few years, the stock is still overvalued with a current value of just $16.05/share.
• Poor Safety: The RS rating is a risk indicator that’s computed from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. SNOW has a poor RS rating of 0.83.
• Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. As you can imagine from the stock’s performance, SNOW has a poor RT rating of 0.65.

The overall VST rating of 0.74 is poor for SNOW and the stock is currently rated a SELL. It’s time to cut losses if you haven’t already done so.?

But if you’re still on the fence, you can dig a bit deeper into this situation with a free stock analysis at VectorVest today. Transform your trading strategy for the better!

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Use VectorVest to Analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. SNOW continues its downward trajectory, losing another 2% today, after announcing plans to take on $2b in debt with hopes of using the capital to pull itself out of this hole. The stock itself has poor upside potential, safety, and timing.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action.

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