Why did snowflake crash?

Snowflake's stock decline can be attributed to a combination of factors:

1. Insider Selling: EVP Christian Kleinerman and Director Frank Slootman's sale of company shares could be interpreted by investors as a lack of confidence in Snowflake's future performance, even if the sales were made at a lower price than the current market value.
2. Financial Performance Concerns: Despite strong product revenue of $829 million, the company's adjusted gross profit margin is expected to drop from 78% in fiscal 2024 to 75% in fiscal 2025, and its adjusted operating margin is expected to fall from 8% to 3%. This decline in profit margins may have contributed to investor uncertainty.
3. Market Sentiment and Economic Shifts: The broader market challenges and shifts in economic landscape, including increased competition and a cooling tech sector, have likely played a role in Snowflake's stock downturn.
4. Investor Perception of Growth Prospects: After reporting strong product revenue, management raised the full-year revenue guidance, which could have been overshadowed by concerns over the impact of increased competition and decreasing profit margins.
5. Valuation and Market Position: Snowflake's stock is trading at a premium compared to its peers, with a forward 12-month Price/Sales of 9.47X, which is higher than the broader sector’s 6.2X and the Zacks Internet Software Industry’s 2.56X. This high valuation could be a cause for concern for investors, especially given the company's recent financial performance and the competitive landscape.

These factors, combined with a broader market downturn and increased competition, have contributed to Snowflake's recent stock decline. It is important to note that while these factors may explain the recent volatility in Snowflake's stock, they do not necessarily indicate a fundamental flaw in the company's business model or financial health.