Teradata Initiated At 'Hold' By Deutsche Bank

In a report released this morning, analysts at Deutsche Bank initiated coverage on Teradata Corp (NYSE: TDC) by placing a Hold rating on the stock and setting a $45.00 price target. Analysts see several things to like and several causes for concern when it comes to Teradata.
Things to like
Analysts point out that investors in the data software market already seem extremely cautious, which provides a nice sentiment foundation for the space. Analysts are also positive on the overall data analytics software segment, and they believe that Teradata is the top name in the high performance data warehouse appliance market. They believe that consensus fears about Hadoop are overblown and Hadoop is not as large of a threat to Teradata’s growth as many believe.
Causes of concern
In the report, analysts pointed out the headwinds facing Teradata’s growth in the near future. “In our view, demand for traditional, on-premises and big-ticket relational data software technology… is unlikely to accelerate materially over the next 2-3 years given a combination of market maturity, pressure from much cheaper open source alternatives such as Hadoop and continued IT budget pressure in the financial services sector.”
Outlook
Analysts are not confident that Teradata can reach the high end of its 2015 growth guidance. The report notes that peers Citrix Systems (NASDAQ: CTSX) and MicroStrategy Inc (NASDAQ: MSTR) have been cutting capex in response to demand pressures, but Teradata’s spending ramp-up in 2015 will likely compress its margins.
Deutsche Bank’s price target represents a 17x multiple on 2016 non-GAAP earnings per share (EPS). With the stock currently trading at about 18x non-GAAP 2015 EPS, analysts believe its upside is limited.