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Morgan Stanley Begins To Warm Up To Cloudera After Q3 Beat

Morgan Stanley Begins To Warm Up To Cloudera After Q3 Beat
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Cloudera Inc (NYSE: CLDR) reported its strongest quarter ever as a public company Thursday, but not all of Wall Street is prepared to turn bullish on the stock.

The Analyst

Morgan Stanley's Sanjit Singh maintains an Equal-weight rating on Cloudera's stock with a price target raised from $19 to $20.

The Thesis

Cloudera's earnings report contained multiple encouraging metrics, Singh said in a research report. (See Singh's track record here.) 

Singh said the notable metrics include: 

  • Current billings grew 51 percent ,which topped the analyst's estimate of just 8 percent.
  • Subscription revenue accelerated to 48 percent year-over-year. 
  • The company is becoming better at packaging its services, which resulted in larger average deal sizes in the quarter of $75,000 versus around $60,000 historically.
  • The cloud strategy is starting to resonate with customers, who can now run multiple workloads with a common management and government framework.

Yet some of the key concerns that existed at the time of Cloudera's IPO have yet to fully disappear, the analyst said. A high level of operating loss and high customer acquisition costs have turned in the company's favor over the past three quarters, which gives investors "optimism that unit economics are steadily improving."

Bottom line, Cloudera's concerns are at this time "abating," and the analyst said he may turn bullish when the company can demonstrate a 30-percent subscription revenue growth rate through fiscal 2020, along with signs that customer acquisition costs are declining.

Price Action

Shares of Cloudera were trading higher by more than 6 percent Friday afternoon.

Related Links:

Cloudera Could Meaningfully Increase Its 'Wallet Share,' Plenty Of Big Fish Left In The Sea

Jim Cramer Advises His Viewers On Cloudera And Shopify

Latest Ratings for CLDR

Jan 2018NeedhamInitiates Coverage OnBuy
Jan 2018MizuhoUpgradesNeutralBuy
Jan 2018CitigroupUpgradesNeutralBuy

View More Analyst Ratings for CLDR
View the Latest Analyst Ratings

Posted-In: cloud Morgan Stanley Sanjit SinghAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


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