Cloudera Inc: Activist Investor Carl Icahn Loves This Stock

Cloudera, Inc: Activist Investor Carl Icahn Loves This Stock
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Cloudera Inc Now Has a Pathway to Higher Levels

The cloud segment is dominated by mega-caps like Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN), but there is plenty of room for the smaller players.

One of these small upstarts, big data analytics company Cloudera Inc (NYSE:CLDR), was flying high, trading at $23.35 in May 2017 prior to plummeting to a low of $4.89 on June 11.

CLDR stock is down by a staggering 41% this year and by 52% over the past year, to well below its initial public offering price of $15.00.

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Chart courtesy of StockCharts.com

But there may be hope for investors in CLDR stock after activist investor Carl Icahn surfaced as a potential savior.

A U.S. Securities and Exchange Commission (SEC) filing shows Icahn building up a major position of 34.6 million shares of Cloudera stock, representing a 12.6% equity stake in the company. (Source: “Icahn Carl C – Carl Icahn – 13F Filing – March 31, 2019,” Fintel, last accessed August 2, 2019.)

But more importantly, Icahn is demanding a seat on the board of directors of Cloudera Inc, which is what activist investors generally do in these kinds of investments.

For CLDR stock investors, the emergence of Icahn will likely mean major changes are forthcoming in terms of operations, management, and just about everything.

In past deals, Icahn has been aggressive in changing things around. The point is that he wants to make money, and lots of it.

There are clearly issues with Cloudera, despite its massive acquisition of rival cloud data company Hortonworks, Inc. (NASDAQ:HDP) in 2018.

Even without the appearance of Icahn, I remained positive about Cloudera being able to turn things around and I felt that the the sell-off in Cloudera stock was excessive.

What makes Icahn’s investment in CLDR stock interesting is that, other than Dell Technologies Inc (NYSE:DELL), his holdings do not include any technology stocks.

The move suggests that Icahn senses there is money to be made in accumulating such a major position in Cloudera stock.

Rising Revenues and Profitability Support Bull Case

Cloudera Inc’s revenues have risen in the last three fiscal years and they are expected to ramp up to $751.2 million in fiscal 2020 for the merged companies and $838.4 million in fiscal 2021. (Source: “Cloudera, Inc. (CLDR),” Yahoo! Finance, last accessed August 2, 2019.)

Fiscal Year Revenue (Millions) Growth
2016 $166.1
2017 $261.0 57.2%
2018 $367.4 40.7%
2019 $479.9 30.6%

(Source: “Cloudera Inc.MarketWatch, last accessed August 2, 2019.)

Cloudera is predicted to cut its adjusted loss per diluted share to $0.31 in fiscal 2020 and to $0.05 in fiscal 2021. There is a high estimate calling for diluted earnings-per-share (EPS) profits of $0.11 in fiscal 2021. (Source: Yahoo! Finance, op. cit.)

Fiscal Year Diluted EPS Growth
2016 -$1.56
2017 -$1.44 7.8%
2018 -$3.38 -135.1%
2019 -$1.21 64.3%

(Source: MarketWatch, op. cit.)

Analyst Take

While revenue and earnings estimates have been declining for Cloudera Inc, the estimates still point to decent growth.

Of course, the expectation that Carl Icahn will be sitting in on the company’s board meetings offers me some confidence that things will improve at Cloudera.

Icahn rarely loses money, and I think that will also be the case with CLDR stock.