Cloudera Stock: Battered Cloud Data Play Rallying After Oversold Selling

cloudera stock
iStock.com/Mohammed Haneefa Nizamudeen

Cloudera Is a Beaten-Down Mid-Cap Big Data Play

The big data solutions segment is rapidly growing, and the future looks promising as companies look for ways to harness their data.

A mid-cap cloud-based big data play that has been battered to levels that are attractive is Cloudera Inc (NYSE:CLDR).

It has been just over a year since Cloudera’s initial public offering (IPO) at $15.00, and the path has been difficult, despite strong revenue growth.

Consider that Intel Corporation (NASDAQ:INTC), an early pre-IPO investor in CLDR stock, paid $30.92 per share in 2014.

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Cloudera stock has vastly underperformed the S&P 500 and the Nasdaq, down 3.2% this year and down 28.3% over the past year.

The CLDR stock chart shows the big downside trade gap followed by the current rally back toward the 50-day and 200-day moving averages.

 

Chart courtesy of StockCharts.com

A break upward could see the stock price move to $19.00–$20.00 in the short term.

Given the price weakness, Cloudera stock looks like an intriguing pick for traders, given what I feel is an attractive risk-to-reward opportunity.

The brain trust behind the emergence of Cloudera is impressive, and it includes former employees of Alphabet Inc (NASDAQ:GOOG), Facebook, Inc. (NASDAQ:FB), Oracle Corporation (NYSE:ORCL), and Yahoo!—now owned by Verizon Communications Inc. (NYSE:VZ).

Cloudera offers its “Cloudera Enterprise Data Hub” platform, which combines machine learning and advanced analytics in a solution to work with big data.

My Fundamental Bull Case for CLDR Stock

Cloudera has limited financial history, but revenues have risen in two straight fiscal years from $166.1 million in FY16 to $367.4 million in FY18, representing an impressive compound annual growth rate (CAGR) of 48.8%.

Year

Revenue ($ Millions)

Growth

FY16

$166.1
FY17 $261.0

57.2%

FY18

$367.4

40.8%

Cloudera’s revenue growth rate is expected to moderate to 20% (to $440.8 million) in FY19, followed by 19.1% (to $525.1 million) in FY20. (Source: “Cloudera, Inc. (CLDR),” Yahoo! Finance, last accessed May 25, 2018.)

While the company’s revenue growth rate is lower, the expected numbers are still quite impressive.

On the bottom line, Cloudera is continuing to burn cash with losses, but the scale of the losses is narrowing, which is what you want to see with technology growth stocks.

For FY19, Cloudera is estimated to report an adjusted loss of $0.59 per diluted share, compared to $0.69 in FY18. The adjusted loss is then expected to fall to a consensus $0.42 per diluted share in FY20, but it could end up being as low as $0.24 per diluted share.

Cloudera’s free cash flow (FCF) is negative, but there was a major improvement in FY18. As the losses decline, Cloudera will move toward positive FCF soon.

Year Free Cash Flow ($ Millions)

Growth

FY16

-$96.0
FY17 -$124.0

-29.1%

FY18

-$55.2

55.5%

In the meantime, Cloudera stock has no debt and almost $371.1 million in cash, so liquidity should not be a problem.

Analyst Take

I suggest taking the opportunity to look closely at CLDR stock at its current depressed price level.

The tailwinds for Cloudera should continue to be bullish in big data. In my view, it’s just a matter of time before the stock price reflects the company’s potential.