Tableau Software Revenue Could Exceed $2B In Revenue By 2022, KeyBanc Says In Upgrade

Tableau Software Inc DATA earned a bullish upgrade from KeyBanc Capital Markets despite the company reporting quarterly results the sell-side firm termed "volatile" since adopting a subscription pricing model in April 2017.

The Analyst

Analyst Brent Bracelin upgraded Tableau Software from Sector Weight to Overweight and established a $125 price target.

KeyBanc had downgraded the stock in January, citing the stock's 65-percent run in 2017.

The Thesis

Tableau Software should see its free cash flow return to growth in the second half of the year as the subscription revenue mix increases from 28 percent in 2017 to 70 percent, Bracelin said in a Tuesday note. (See the analyst's track record here.) 

Along with an increase in subscription revenue, the analyst forecast a re-acceleration in license growth to 20 percent in the second half of 2019. 

The company's new subscription bundles are aiding a footprint expansion with enterprises, Bracelin said, citing feedback from channel partners and KeyBanc data. 

"Based on a subscription model transition that understates improving fundamentals in the short run, we have built out a five-year base case and bull case model that forecast revenue could top $2 billion and free cash flow could expand to $6/share or more by 2022," the analyst said. 

These estimates, according to the analyst, assume increases in Tableau's share of the business intelligence and analytics software market from 5 percent in 2017 to 10 percent.

KeyBanc sees the second quarter of 2018 as a free cash flow trough for Tableau, with the metric likely to reaccelerate in the second half. 

Citing improving fundamental prospects into 2019, KeyBanc slightly raised its estimates.  

The Price Action

Shares of Tableau Software have added about 50 percent year-to-date.

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