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Cloudera Plummets 40% Following Weak Forecast; Analysts Weigh In On What To Do Next

Cloudera Plummets 40% Following Weak Forecast; Analysts Weigh In On What To Do Next

Cloudera Inc (NYSE: CLDR), an enterprise-grade data analytics and machine learning platform provider, on Tuesday reported fourth quarter results, which sent shares plummeting by more than 40 percent. Despite the massive sell-off, some Wall Street analysts still recommend buying the stock.

Shares of Cloudera hit a new 52-week low of $13.26.

The Analysts

Stifel's Brad Reback maintains a Buy rating on Cloudera's stock with a price target lowered from $24 to $19.

Morgan Stanley's Sanjit Singh maintains an Equal-weight rating on Cloudera with a price target lowered from $23 to $21.

JPMorgan's Mark Murphy downgraded Cloudera from Overweight to Neutral with a price target lowered from $23 to $16.

Stifel: The Good And Bad

Cloudera's earnings report was "solid" but management's fiscal 2019 revenue guidance of $435 million to $445 million was a disappointment, Reback said in a research report. Not only did the guidance fall short of the consensus estimate by $20 million at the midpoint, but subscription revenue growth implies a deceleration by 25 percent from the prior year.

Cloudera's management attributed the guidance to a lower-than-expected bookings in the fourth quarter from weak net expansion activity and new accounts outside of its core market that lack "strong future growth potentials," the analyst wrote. The company did present a game-plan to "correct these issues," but the guidance will certainly "put shares in the penalty box" until it can demonstrate a more consistent execution.

Nevertheless, Cloudera's long-term market opportunity remains attractive and future opportunities should enable the company sustain a 30 percent recurring revenue growth and margin expansion in the coming years, Reback said. As such, the sell-off should be seen as a long-term buying opportunity.

Related Link: Cloudera Issues Weak Guidance; Deutsche Bank Downgrades On Risk Of 'Demand Shift'

Morgan Stanley: Waiting For Signs

Cloudera's earnings and guidance may suggest its opportunity is "more limited" compared to prior expectations, Singh said in a report. On the other hand, the company is taking the necessary steps to deliver better growth in fiscal 2020 so investors may want to wait for signs of broader based usage across its customer base before turning bullish.

Some encouraging metrics? Operating margin of -16 percent rising 3,000 basis points from a year ago and billings grew 27 percent from a year ago to $163 million.

The analyst highlighted multiple areas of concern. Billings growth is expected to slowdown from 38 percent to 14 percent in 2018 and low-20s in 2019. Operating cash flow burn in 2019 is expected to be -$40 million to -$35 million, which is below Singh's estimate of -$3 million.

JPMorgan: More Questions To Answer

Cloudera's management discussed a strategy to change its go-to-market approach, but it may take "some time to bear fruit," Murphy said in a note. In the meantime, the slowdown seen in Expansion bookings will impact the stock's narrative at a time when some of its software peers reported "solid" results.

Cloudera's management may need to address several questions, including:

  • How quickly can the Hadoop market move to public clouds?
  • Are Cloudera's deployments now at a level of size and complexity that's "bogging down" renewals?
  • What impact has the IBM-HortonWorks agreement have on Cloudera's business?

"We think CLDR shares will head back toward where they entered the year, and that it will take time for the investment narrative and sales execution to regain its footing," Murphy wrote.

Latest Ratings for CLDR

Dec 2019MaintainsUnderperform
Dec 2019MaintainsNeutral
Dec 2019MaintainsNeutral

View More Analyst Ratings for CLDR
View the Latest Analyst Ratings

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