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

Cloudera IncCLDR

Justification For Ratings Initiation

According to Stifel's Brad Reback, the provider of an enterprise-grade data analytics platform operates a unique hybrid open source software model that brings together more than two dozen open source projects with proprietary solutions to target the enterprise segment of the market. Reback joins several of his Wall Street peers in initiated coverage of the newly listed company with bullish ratings on Tuesday.

Room For Growth

Reback noted that Cloudera has only signed around 500 customers to date, but this means there is plenty of room ahead to gain traction in the large market. The company could also meaningfully increase its wallet share of existing clients since it only manages around 5 percent of its customers' total workloads. As such, the company could realistically sustain a 30 percent-plus recurring revenue growth rate along with margin expansions over the coming years.

Stock Prices And Valuation

Related Links: Benzinga's Top Upgrades, Downgrades For May 23, 2017 The Market In 5 Minutes _______ Image Credit: By Alex Moundalexis [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Reback's bullish stance on Cloudera also stems from its mostly untapped international exposure. Specifically, international operations accounted for just 25 percent of total revenue throughout fiscal 2017 and the intentional segment represents another growth driver moving forward.

Finally, the analyst believes Cloudera's current stock price (at the time of writing) of $20.91 implies a valuation of 7.9x his fiscal 2019 EV/recurring revenue estimate of $355.2 million, which is in-line with its high-growth subscription peers at 6x to 8x. However, given the multiple drivers of growth ahead the analyst suggested that Cloudera's stock should trade at a premium valuation.