Cloudera, Inc.

 

CLDR Details
 
CLDR Chosen by IFE for Digitalization:Cloudera, Inc. (NYSE: CLDR) is engaged in the development and distribution of software for business data which incorporates storage, access, management, analysis, security, search, processing, and analysis applications. On May 12, 2020, the company stated that its Cloudera Data Platform (CDP) has been selected by the Institute for Energy Technology (IFE), to power its digital transformation program. Cloudera Data can provide powerful analytics in a self-service, private cloud atmosphere.

 
CLDR offers Machine Learning Capabilities: In another update, the company stated the availability of its increased set of machine learning production competencies for MLOps in Cloudera Machine Learning (CML). The latest solution brings together data scientists, machine learning engineers, and operators in a single unified solution, thereby reducing time to value and minimizing business risk for production machine learning simulations.
 
Other Recent Updates: On April 28, 2020, Cloudera opted for Red Hat OpenShift as the desired container solution for CDP Private Cloud to provide powerful, self-service analytics and enterprise-grade performance with high security and governance policies required by the IT leaders. In another update, the company stated that it has been selected by LINE Corporation to support the growth of the latter’s AI technology-based business and the Data Science and Engineering Center.
 
4QFY20 Key Highlights for the Period Ended January 31, 2020: During the quarter, the company reported non-GAAP earnings of 4 cents per share compared with the year-ago loss of 15 cents. Revenues for the quarter increased 46.5% year over year and came in at $211.7 million, on the back of rapid adoption of its cloud-based products and services. During the quarter, the company added 27 net new customers, with greater than $100,000 of annualized recurring revenues (ARR) reported in the quarter. ARR went up ~11% on pcp and stood at $731.2 million. Revenues from subscription came in ~$182 million, up 47.9% year-over-year. Whereas, revenues from services rallied 38.4% and stood ~$29.8 million. Research and development (R&D) expenses rose 26.9% on a year-over-year basis, whereas sales and marketing expenses were up 42.2% on pcp. The company exited the period with cash, cash equivalents, marketable securities, and restricted cash of $486.5 million. Operating cash outflow stood at $9.4 million. 
 

Key Financial Highlights (Source: Company Report)
 
Outlook: For 1QFY21, the company expects revenues to be in the range of $202 million and $207 million. Subscription revenues are projected in the band of $180 million and $183 million. Non-GAAP net earnings will likely range from a loss of 1 cent to earnings of 1 cent. For FY21, the company expects revenues to be in the range of $860 million and $880 million, whereas subscription revenues are expected to be between $750 million and $760 million. Non-GAAP net earnings are likely to be between 25 cents to 29 cents.
 
Risk Analysis: The company faces intense rivalry from the solutions unveiled by Amazon, Microsoft, and Google for operating big data projects on their individual public cloud platforms. Further, the company has made significant investment in its Cloudera Data Platform offering, hence failure to achieve market adoption in its business, may hamper results of operations and financial condition. Also, risk pertaining to foreign currency fluctuations could negatively affect its operating results.
 
Conclusion: The company is set to report its first-quarter fiscal 2021 results on 3 June 2020. We believe that the company’s portfolio strength and sales force reorganization will aid CLDR to win more customers. Moreover, the company’s strategic alliance with IBM and the continuous adoption of Cloudera Data Platform on Amazon’s AWS and Microsoft’s Azure will help it to gain a sizable market share, going forward. Notably, CLDR’s continuous strength within financial services, healthcare, government, and telecom is noteworthy. We opine that the company is expected to gain positive momentum in 1QFY21, from the above-mentioned tailwinds.
 
Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)
 
P/BV Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of CLDR closed at $10.96 with a market capitalization of ~$3.24 billion. The stock made a 52-week low and high of $4.76 and $12.22, respectively, and is currently trading above the average of this range. The stock has delivered a positive return of ~22.90% in the last one month but went down ~11.87% on a year-to date basis. Gross margin in FY20 stood at 70.7%, lower than the industry median of 76.9%. As more and more businesses are moving their operations to the cloud, the relevance for software related data continues to grow, the company stands to benefit from this increasing demand. It also remains focused on cost-reduction efforts. Additionally, optimistic outlook for the company’s coming quarter and FY21 instils investors’ trust over the company’s growth prospects. We believe that the stock might see a run-up due to its fundamental strength despite a narrow gap between current price and 52-week high level. Considering the above factors, we have valued the stock using P/BV multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). Considering the industry-wide scenario along with the above factors, we give a “Buy” recommendation on the stock at the closing price of $10.96, up 6.93% on 1 June 2020.
 
 
CLDR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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