Hortonworks Has Doubled, but More to Come
A big data applications provider that has been delivering some impressive gains to traders is small-cap Hortonworks Inc (NASDAQ:HDP), which has a market cap of just over $1.1 billion.
With a share price of around $16.70 (as of this writing), the stock has already surged by about 105% this year, but there is more to come.
Hortonworks has not been around that long, only starting in 2011. Yet, the company has recorded some massive growth, which has driven the number of staff members from the initial 24 engineers to the more-than-1,100 workers today.
Two factors impress me about Hortonworks: 1) it operates in the rapidly growing big data solutions business and 2) it has operations in 19 countries.
International Business Machines Corp. (NYSE: IBM) must be impressed, considering it announced in June that it will move its data science and machine learning to the open source platform developed by Hortonworks.
Strong Fundamentals Support HDP Stock’s Bull Run
The rally in HDP stock has been justified by the strong underlying fundamentals. Hortonworks ramped up revenues from a mere $46.0 million in 2014 to $121.9 million in 2015 and $184.5 million in 2016.
The compound annual growth (CAGR) from 2014 to 2016 was an impressive 100%. While this is strong, it’s not sustainable, as is usually the case.
The revenue growth rate is estimated to normalize down to 34.2% (to $247.5 million) this year, and 27.3% (to $315.1 million) in 2018. The high estimate for 2018 is $350.6 million in revenue. (Source: “Hortonworks, Inc. (HDP),” Yahoo! Finance, last accessed September 15, 2017.)
Also, Hortonworks management has controlled the cost side and has driven up higher gross profits while expanding gross margins to 61% in full-year 2016.
Also Read: Three Top Tech ETFs for 2017
But, while the revenue picture looks amazing, Hortonworks has yet to turn a profit. The annual losses have been on the decline, however. The loss could fall to as low as $0.85 per diluted share in 2018.
Technical Chart Points to $30
On the below HDP stock chart, note that there were two tests last year, at $8.43 in February 2016 and $6.92 in October 2016. In each case, Hortonworks stock held and rallied.
Chart courtesy of StockCharts.com
The strong one-year rally was confirmed by a bullish golden cross that surfaced in March 2017, when HDP stock was trading at just above $9.00.
If the Hortonworks stock price can hold, we could see it target the $20.00–$22.00 levels and eventually make its way toward $26–$30 for a potential doubling.
While Hortonworks stock has already produced strong alpha returns for investors, the growth forecasts are for potentially bigger moves to come, for patient traders. As long as the 50-day moving average holds, the upside looks promising.