Barclays Defends Talend Says Selloff Is Unwarranted, Upgrades To Overweight

Talend SA ADR TLND is a provider of open source integration solutions and a vendor that will benefit from the Big Data trend, at least according to Raimo Lenschow of Barclays.

Lenschow upgraded Talend to Overweight from Equal-Weight with an unchanged $28 price target. The analyst noted the stock has lost nearly 30 percent since its second quarter earnings print on "no identifiable cause."

Goldman Sachs shared a similar bullish sentiment when it upgraded the stock to Buy on October 14.

Lenschow noted that Talend provides solutions for companies to clean and prepare data for analysis and the market for data cleaning or ETL (Extraction, Transformation and Loading) is attracting a lot of interest among large companies. In fact, the analyst's recent survey with Chief Information Officers showed that Big Data is a top spending priority which will result in growth for companies like Talend for years to come.

Why Talend?

Lenschow highlighted Talend's subscription nature of its business and a favorable competitive environment. The company could continue growing its revenue at 30 percent through at least 2018, but now the stock's valuation is "disconnected."

Given the near 30 percent decline in the stock since its second quarter earnings print, the stock "looks attractive" on an EV/Sales versus growth basis and the analyst's regression analysis suggests the stock should trade at a 7.7x multiple which is "far above" the current 4.2x multiple.

In addition, the stock is trading at just 3.1x EV/Sales on fiscal 2018 estimates which is well below historical subscription ranges.

Bottom line, the nearly 30 percent upside in the stock from current levels justifies the analyst's upgrade to Overweight.