Jim Cramer has made a lot of stock picks throughout his career. Some of them have panned out quite nicely, while others turned into busts. Cramer recently unveiled a stock pick that has some issues if you take a deeper look.
Snowflake (NYSE:SNOW | SNOW Price Prediction) recently came up as a stock that Jim Cramer likes. He is bullish about the stock’s long-term prospects, but the price doesn’t look right at the moment. These are some of the details investors should keep in mind before considering Snowflake stock.
The Valuation Is Too High
Snowflake suffers from a lofty price-to-sales ratio that’s hovering near 20. Furthermore, the company is currently sporting a 196 forward P/E ratio. Both of those metrics are up considerably since the stock’s 40% year-to-date run.
Some investors can deal with high valuations if the company is growing fast enough, but Snowflake doesn’t do enough to warrant that vacation. The corporation only boosted its revenue by 26% year-over-year in Q1 FY26. Remaining performance obligations also grew by 34% year-over-year, coming in at $6.7 billion.
Snowflake is in the right industry for long-term growth, but its growth rates do not support a price-to-sales ratio that’s closing in on 20. The firm’s revenue growth rate has been steadily decelerating, which is normal for any corporation. However, the deceleration is happening too quickly and at an unattractive valuation. Snowflake has to turn back the clock and report revenue growth above 50% each year to make a stronger argument for its current valuation.
Losses Continue To Grow
Not only is Snowflake’s revenue growth decelerating, but its net income remains deep in the red. The company burned through more than $400 million in the most recent quarter, and that was even worse than last year. If Snowflake has to burn through more cash to achieve higher revenue growth, it’s not sustainable.
Even though Snowflake is a leading player in the AI industry, financial solvency eventually matters. Investors may rush for the exits if year-over-year revenue growth drops below 20% because it may take a while for Snowflake to become profitable.
An Alternative To Consider
Although I disagree with Jim Cramer’s bullish take on Snowflake, I am more on board with his bullish stance on CoreWeave (NASDAQ:CRWV). CoreWeave is another AI stock, but it also has a deep partnership with Nvidia (NASDAQ:NVDA) that can challenge top cloud providers.
CoreWeave is also burning through cash. The firm plowed through more than $300 million in Q1 2025. The company generated $981.6 million in the quarter, which was slightly less than Snowflake’s $1.04 billion. However, the big difference is that CoreWeave boosted its revenue by 420% year-over-year. That growth rate makes CoreWeave more compelling than Snowflake.
Even though CoreWeave’s growth rate will eventually decelerate, the company isn’t far removed from producing more than $10 billion in annual revenue. The company can realistically achieve that milestone in the next 1-2 years if the growth deceleration is reasonable. CoreWeave and Snowflake also happen to have nearly identical market caps that hover close to $75 billion apiece.
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