Goldman On Hortonworks: Big Data Still Has Legs

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Hortonworks Inc HDP is scheduled to report its 1Q16 on May 4, after the close. Goldman Sachs’ Jesse Hulsing maintained a Buy rating for the company, with a price target of $16. The analyst said that while big data still had legs, focus would be on unit economics.

Analyst Jesse Hulsing expects Hortonworks to report its 1Q16 revenue at $39.5mn, representing 77 percent y/y growth, in-line with consensus. Billings are estimated at $49.5mn, with 76 percent y/y growth, and operating margins at -87.5 percent, versus consensus of -88.8 percent.

What The Numbers Mean

Hulsing mentioned that 1Q was a critical quarter for the company, following a February secondary and 4Q results that were strong, but missed the subscription billings estimates. She added, “Intra-quarter, data points were mostly positive on Hadoop adoption, expansion of existing clusters, and use case growth.”

Hortonworks had announced a reseller agreement with Pivotal, which not only eliminates a competitor but also adds another channel for distribution. “We expect revenue upside and subscription billings in line with our estimate of $35.8mn (+90% y/y, -14% q/q),” the analyst wrote.

Focus is likely to be on profitability and cash flow, after management pulled forward adjusted EBITDA breakeven to 4Q16, which implied a CFO breakeven in mid-2017.

Hulsing commented, “We will also be focused on underlying unit economics – net expansion rate and subscription billings CAC.” She said that both had been improving, and sustained improvements “are leading indicators of the sustainability of HDP’s business model.”

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Posted In: Analyst ColorLong IdeasReiterationAnalyst RatingsTrading IdeasGoldman SachsJesse Hulsing
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