Talend Stock’s Gap Up Could Signal More Gains
One of the top technology investment themes going forward into the next decade will be solutions to handle and analyze the enormous amount of data that companies collect.
The big data segment is massive, so there is enough business for many participants—ranging from the small players to the mega-cap providers.
On the smaller end, an intriguing big data play with above-average price appreciation potential is Talend SA (NASDAQ:TLND). A developer of advanced big data and cloud integration applications, the company has been recording strong growth in its cloud business.
Talend offers an innovative “Data Fabric” platform that enables companies to pull big data from multiple software applications for analysis. This process allows scientists to reduce the time required for collecting and processing data into a workable format.
But despite the prospects, Talend stock has been hemorrhaging on the stock chart since trading at a record $73.52 in September 2018.
The stock fell to a 52-week low of $31.35 during the stock market sell-off in December but has since rallied 53% in two months.
TLND stock plummeted in November 2018 from the $60.00 level prior to attracting some buying support around $31.00–$32.00.
Chart courtesy of StockCharts.com
There was some life after Talend stock recently surged on an upside trade gap to above the near-term resistance level of $40.00. With the break, the stock recovered its 50-day moving average and may take a run at the 200-day moving average.
What Talend Stock Needs to Do
The issue with Talend is not with revenue, but on the cost side and its inability to turn profits or generate free cash flow (FCF).
Talend recorded higher revenue in each year from $61.6 million in 2014 to a record $204.32 million in 2018, up 36.37% year-over-year.
The compound annual growth rate (CAGR) during this timeframe was an impressive 34.94%.
|Fiscal Year||Revenue (Millions)||Growth|
(Sources: “Talend S.A. ADR,” MarketWatch, last accessed March 1, 2019 and “Talend Reports Fourth Quarter and Fiscal Year 2018 Financial Results,” Talend, February 14, 2019.)
Looking ahead, Talend is estimated to moderate its revenue growth rate to 21.6%–$248.6 million in 2019 and to 22.5% to $304.2 million in 2020. (Source: “Talend S.A. (TLND),“ Yahoo! Finance, last accessed March 1, 2019.)
Even so, the revenue growth rate is decent.
The problem facing TLND stock is the company’s losses and failure to achieve positive FCF. Talend has recorded five straight years of generally accepted accounting principles (GAAP) adjusted losses.
In 2018, Talend reported an adjusted loss of $0.52 per diluted share, $0.06 below the consensus. (Source: Talend, op cit.)
The next two years will likely continue to see TLND burn through cash.
For 2019, the company’s adjusted loss is expected to drift higher to $0.89 per diluted share before narrowing back to $0.54 or as low as $0.32 per diluted share in 2020. (Source: Yahoo! Finance, op cit.)
The way I see it is that Talend SA’s revenue continues to show decent growth and its loss narrows, then TLND stock will likely reward longer-term investors.