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Tableau Software Inc (NYSE: DATA) reported better-than-expected 1Q revenue growth, but its license revenue growth continued to decelerate, declining from 31 percent in 4Q15 to 14 percent in 1Q16. Morgan Stanley’s Keith Weiss maintained an Equal-Weight rating for the company, while raising the price target from $55 to $60.

Risk To License Growth Targets

Tableau Software has projected a rise in license revenue growth by 200-300 bps in Q2. This implies that license revenue growth would need to accelerate to 30 percent later in the year in order for the company to achieve its full-year growth target of 20 percent, analyst Keith Weiss said.

Related Link: Wunderlich Lowers Tableau's Price Target To $656, Still Buying The Stock

Tableau Software may find it difficult to achieve this forecast, given continued degradation of productivity trends in 1Q, a shift towards more ratable revenue exerting pressure on license growth and management’s increasing willingness to discount, Weiss commented.

“Accelerating growth necessitates QoQ seasonality ahead of what Tableau saw last year and an 8-10% improvement in sales productivity from Q1 levels (based on our analysis),” the analyst wrote.

Tableau Software’s decision to reduce expense growth is encouraging. The company now expects a 500-600 net increase in headcount in FY16 versus its prior plans of 1,000 net adds. The reduction in hiring plans enabled the company to raise its FY16 operating margin guidance by 410bps at the midpoint, Weiss mentioned.

Latest Ratings for DATA

Oct 2016OTR GlobalDowngradesPositiveMixed
Aug 2016RBC CapitalDowngradesOutperformSector Perform
Aug 2016BairdMaintainsOutperform

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