Oppenheimer Bullish On Tableau Software, But 'Show Me' Element Remains

'Show Me' Quality

"While we're bullish, there's a 'show me' element in play as management focuses on improving sales force productivity and as recent shifts in product mix toward SaaS/ Online delay revenue recognition and weigh on profitability. We see this shift as necessary and positive longer-term," analyst Ittai Kidron wrote in a note.

Kidron, who started coverage of the stock with an Outperform rating and $62 price target, noted that Tableau helped usher in Modern BIA and democratized analytics for all users with its Tableau Desktop.

Related Link: Rosenblatt Initiates Coverage On Tableau Software At Buy

The company's products currently support over 46,000 customers in over 160 countries and enjoy strong user loyalty given their compelling value proposition and attractive total cost of ownership.

"We estimate Tableau's total '15 TAM at ~$17.8 billion (vs. '15 sales of $654 million) and growing to $24.1 billion by 2019, which reflects a 7.8 percent CAGR," Kidron highlighted.

Making Its Own Way

However, the analyst acknowledged that the competition is improving and becoming more price aggressive. But, Tableau is also making its own price moves.

"While a risk, Modern BIA is still at a life-cycle point where discounting likely drives higher growth/penetration than compromises Tableau's business model," Kidron continued.

As such, the analyst expects the shares to remain volatile over the next few quarters as Tableau's revenue model evolves and as investors gradually gain confidence in its model transformation.

Kidron expects 2016/2017 EPS of $0.27/$0.46 on revenue of $832 million/$1 billion.

At the time of writing, shares of Tableau were down 0.59 percent to $54.31.

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