Technology

35% Upside Predicted for Oversold Big-Data Analytics Provider Cloudera

Jon C. Ogg

Published: April 8, 2019 2:35 pm

Last Updated: January 11, 2020 9:28 am

Being in the business of data analytics is supposed to offer close to endless growth opportunities. That hasn’t exactly been the case for Cloudera Inc. (NASDAQ: CLDR), or at least not if you only judged the stock price.

The big-data analytics company had seen its shares fall about 50% from the peak in the fall of 2018, with a drop a month earlier having wiped out nearly all of its recovery attempts. According to Sanford Bernstein, enough is enough. The firm raised its rating on Cloudera to Outperform from Market Perform along with a $15 price target on Monday.

After a 20% sell-off since its earnings report in March, and with some structural competition acting as headwinds, Bernstein believes that Cloudera should benefit strategically and on revenue growth after merging with Hortonworks and that the drop in the shares has been overdone.

Zane Chrane, the Bernstein analyst behind the call, sees just 15% of adjusted growth in recurring revenues translating to 20% total revenue growth in fiscal year 2021, and that is even under the company’s own forecast of 20% or higher in annual recurring revenue.

After the March earnings disappointment, Cloudera saw its shares receive price target cuts from the likes of Wedbush (to $16 from $17) and Stifel (to $16 from $19), while Nomura/Instinet maintained its Buy rating and $20 target.

Tom Reilly, chief executive officer of Cloudera, addressed the January-close of the Hortonworks merger earlier in the year and the opportunities ahead:

Having completed the merger with Hortonworks, we are now squarely focused on delivering a powerful combined, integrated platform purpose-built for enterprise customers. Enterprises want an enterprise data cloud, which offers the flexibility of both hybrid and multi-cloud delivery, as well as the versatility of multi-function analytics, all with common security and governance. As the open source data management and analytics standard, we believe Cloudera is uniquely positioned to deliver these capabilities at the data layer, bring the enterprise data cloud to our more than 2,000 customers and lead this new market.

Wall Street often has issues evaluating companies in the first few quarters of large merger combinations of two separate entities can come with stumbles and issues along the way. This call is not even predicting a return to the much higher share prices of 2018 and 2017, and it is also a below-consensus price target.

With shares up almost 4% at $11.55 on Monday, the 52-week range is $10.07 to $20.18 and the market cap is $3.1 billion. The consensus Refinitiv analyst price target was last seen at $18.24.

This analyst call represents an implied 35% upside from Friday’s closing price of $11.11, much higher than the 8% to 10% typical Dow or S&P 500 analyst calls and higher than the 10% to 15% implied upside for most up-and-coming companies that have established businesses and with known business models.