Market Overview

Teradata's Valuation 'Too Compelling To Ignore,' Analyst Says

Share:
Teradata's Valuation 'Too Compelling To Ignore,' Analyst Says

Teradata Corporation (NYSE: TDC)'s ongoing transition to become a "subscription-first" company is admirable and justifies a bullish case on the stock, according to Stifel.

The Analyst

Stifel's Brad Reback upgraded Teradata from Hold to Buy with a price target lifted from $45 to $49.

The Thesis

Teradata's business model continues to evolve so that its services can be used on a software-only basis within on-prem or public cloud models, Reback said in a note.

Reback noted that the company's sales team was given the green light in the first quarter to push subscriptions rather than licenses. Accordingly, subscription related sales could reach around $240 million in 2018 and growth to almost $450 million next year. Over time, the company's margins should move from the low-70 percent range to the mid-70 percent range.

Teradata's stock is trading at a level "too compelling to ignore," Reback said. This creates a scenario where the downside to shares is limited as other legacy license only application vendors saw their respective stocks bottom in the 2.5x-3x range.

Investors would be correct in pointing out management's focus on shifting towards a subscription business is weighing on margins and cash flow, the analyst wrote, but this is only short term and it's reasonable to conclude at this point the "worst is behind the company."

Price Action

Shares of Teradata were trading higher by more than 2.5 percent at $39 Thursday afternoon.

Related Links:

Morgan Stanley Swings From Cautious To Bullish On IT Hardware

Bernstein: Teradata Positioned To Expand Recurring Revenue Growth

Latest Ratings for TDC

DateFirmActionFromTo
Dec 2020Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2020UBSMaintainsSell
Nov 2020BMO CapitalMaintainsMarket Perform

View More Analyst Ratings for TDC
View the Latest Analyst Ratings

 

Related Articles (TDC)

View Comments and Join the Discussion!

Posted-In: Brad Reback cloud Data StifelAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
TSLAJP MorganMaintains125.0
INTCTruist SecuritiesMaintains64.0
FBTruist SecuritiesMaintains320.0
GSCitigroupMaintains370.0
AAPLCowen & Co.Maintains153.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com