Icahn Loves Cloudera Stock, Up 100% Since March But More to Come

Carl Icahn Loves Cloudera Stock, Up 100% Since March & More to ComeCloudera Inc’s Supercharged Gains May Only Be the Start

When activist investor Carl Icahn sets his sight on a company, it generally signals big changes ahead.

That was the case with big data analytics company Cloudera Inc (NYSE:CLDR). Cloudera stock jumped from the $7.00 level to over $9.00 in August 2019 on news that Icahn had acquired close to 35 million shares of stock and has since added another 20 million shares.

Fast forward to June 18 and CLDR stock was trading at a new 52-week high of $13.62, up a sizzling 100% over the past three months. The superlative move was aided by Cloudera stock plummeting to $4.76 on March 18 when COVID-19 fears pounded the stock market.

And while the gains are impressive, there are likely many more to come for CLDR stock. Cloudera shares are still below their initial public offering (IPO) price of $15.00 and high of $23.35 in May 2017.

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Chart courtesy of StockCharts.com

Icahn is not known for technology investing, but one thing he does understand is how to squeeze hidden value from targeted companies.

Being the biggest shareholder in Cloudera stock (an 18.6% stake) suggests that Icahn is dead serious about making things happen. The legendary investor has already made over $320.0 million from his CLDR stock investment. He could walk away, but I doubt he is satisfied.

Cloudera Inc had high aspirations in the big data analytics space, especially after its colossal all-stock $5.2-billion merger with rival cloud data play Hortonworks, Inc in 2018.

But the merger may not have gone as smoothly as expected. This is where Icahn comes in to help make the merger work. If he can succeed, I would expect Cloudera stock to rise much higher.

My Bull Case for CLDR Stock as Revenues Surge

Even prior to the merger with Hortonworks, Cloudera was delivering strong double-digit revenue growth from fiscal 2017 to fiscal 2019. The addition of Hortonworks propelled its revenues by 65.5% in fiscal 2020 as Cloudera Inc moves toward $1.0 billion in revenues.

Fiscal Year Revenues (Millions) Growth
2016 $166.1
2017 $261.0 57.2%
2018 $372.3 42.6%
2019 $479.9 28.9%
2020 $794.2 65.5%

(Source: “Cloudera Inc.MarketWatch, last accessed June 18, 2020.)

Revenues are estimated at $838.4 million in fiscal 2021 and $919.1 million in fiscal 2022. (Source: “Cloudera, Inc. (CLDR),” Yahoo! Finance, last accessed June 18, 2020.)

At the same time, CLDR is heading toward generating positive adjusted profits of $0.28 per diluted share in fiscal 2021 and $0.42 per diluted share in fiscal 2022.

Cloudera also produced positive free cash flow (FCF) in fiscal 2019 and 2020. Given the move toward profitability and the fact that Icahn has a thing about operational efficiency, I’m confident that the company’s FCF will strengthen.

Fiscal Year Free Cash Flow (Millions) Growth
2016 -$96.0
2017 -$124.0 -29.1%
2018 -$55.2 55.5%
2019 $24.2 143.8%
2020 $7.0 -70.9%

(Source: MarketWatch, op. cit.)

In the meantime, maintaining a healthy balance sheet during the uncertainties of the pandemic is critical. Cloudera Inc is in a relatively sound position, with $412.0 million in cash and a mere $212.4 million in debt. (Source: Yahoo! Finance, op. cit.)

Looking back, it was a good thing the Hortonworks merger didn’t involve any cash, which would have made carrying a big debt load tough.

Analyst Take 

Despite the fact that Cloudera stock jumped 100% just in the last three months, there is still a pathway to higher prices as Icahn works his magic.

The tailwinds for cloud-based big data solutions is significant, which could really give CLDR stock another major leg higher.