Guidance Cut May Cap Near-Term Upside For Tableau Software

Deutsche Bank reaffirmed its Hold rating on Tableau Software Inc DATA after the company cut all key 2016 guidance metrics due to an unexpected ramp in ratably-recognized deals stemming from the recent uptick in price discounting/flexibility.

"We believe this shift will cap the near-term upside in the stock," analyst Karl Keirstead wrote in a note.

Despite the ratable mix shift increased second quarter license bookings by 28 percent, Keirstead is unwilling to deem the pricing shifts to be a positive for the following reasons:

1. "The 2H16 guidance cut (in contrast to Splunk Inc SPLK) while the ratable mix is still <20%"
2. "Tableau said that license bookings growth will be lumpy (implying it could decelerate) and could have been boosted by some multi-year prepaid deals"
3. "The new pricing model will roll into existing deals as they renew and hence the financial impact might last beyond 2017"
4. "The root cause of the pricing and hence ratable mix shift is sluggish demand, competition and price-sensitivity."

As such, the analyst said Tableau is facing a tougher end market.

For 2017, Keirstead cut his revenue estimate to $1.04 billion (+23 percent) from $1.08 billion and non-GAAP EPS estimate to $0.74 from $1.10.

The analyst also cut its price target to $60 from $65.

"Tableau shares now trade at 4.7x 2016e revs, 3.8x 2017e revs and 22x 2017e FCF, which we view as fair but not cheap given 15% license revs growth, 25%+ license bookings growth, a mid single-digit margin profile, a challenging and price-sensitive end market and the lack of visibility into the 2017/2018 outlook," Keirstead added.

At time of writing, shares of Tableau fell 6.29 percent to $52.85.