Teradata Corporation: Up 127% This Year & Institutions Still Love This Global Big Data Play

Massive Growth Potential for Teradata Stock on Horizon

One of the most discussed technology segments over the last few years has been the big data solutions space. That’s not surprising, given that companies need to generate advanced insights from their hoards of data to deliver better decisions.

According to MarketsandMarkets, the global big data market could surge to $229.4 billion by 2025. And that means big opportunities for the developers of data analytics. (Source: “Big Data Market by Component, Deployment Mode, Organization Size, Business Function (Operations, Finance, and Marketing and Sales), Industry Vertical (BFSI, Manufacturing, and Healthcare and Life Sciences), and Region – Global Forecast to 2025,” MarketsandMarkets Research Private Ltd., last accessed August 24, 2021.)

In the mid-cap space, one of the top gainers this year has been Teradata Corporation (NYSE:TDC). Its shares are up by a whopping 127%.

The company’s multicloud enterprise data warehouse enables companies to analyze their data and provide advanced insights.

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TDC Stock Easily Outperforms

Teradata stock broke out for a long accumulation channel in January, triggered by the surfacing of a golden cross, a bullish crossover pattern that arises when the 50-day moving average moves above the 200-day moving average.

TDC stock spiked with an upside trade gap to a five-year high of $59.58 in February. After retrenching below $40.00 in March and April, Teradata stock recovered and is rallying near its February high.

TDC stock has launched multiple attempts to retest its high, and it could break out above $60.00.

On the downside, the risk is support around $40.00.

Chart courtesy of StockCharts.com

Strong Profitability; Free Cash Flow Surges

At first glance, Teradata Corporation’s five-year revenue picture doesn’t jump out. The company’s revenues fell in three of the last four years, to a five-year low in 2020.

Fiscal YearRevenues (Billions)Growth
2016$2.3N/A
2017$2.2-7.2%
2018$2.20.4%
2019$1.9-12.3%
2020$1.8-3.3%

(Source: “Teradata Corp.” MarketWatch, last accessed August 24, 2021.)

But there is some optimism. Teradata is expected to grow its revenues by 4.7% to $1.9 billion this year and by 3.3% to $2.0 billion in 2022. (Source: “Teradata Corporation (NYSE:TDC),” Yahoo! Finance, last accessed August 24, 2021.)

While I would like to see higher revenue growth rates, it’s a start.

Moreover, Teradata produced earnings before interest, taxes, depreciation, and amortization (EBITDA) income in five consecutive years. After three years of declining EBITDA, the company came back with a strong 2020.

Fiscal YearEBITDA (Millions)Growth
2016$497.0N/A
2017$234.0-52.9%
2018$195.0-16.7%
2019$169.0-13.3%
2020$278.064.5%

(Source: MarketWatch, op. cit.)

Teradata Corporation’s profitability on a generally accepted accounting principles (GAAP) basis has been mixed, but the company delivered impressive diluted earnings per share (EPS) of $1.16 in 2020, a major reversal from its GAPP diluted EPS loss in 2019.

Teradata beat the consensus EPS estimates in the last five straight quarters.

Fiscal YearGAAP Diluted EPSGrowth
2016$0.95N/A
2017-$0.53-155.8%
2018$0.25146.7%
2019-$0.18-170.8%
2020$1.16760.1%

(Source: MarketWatch, op. cit.)

The company’s profitability outlook is bullish, with Teradata Corporation’s consensus adjusted EPS estimate rising. Based on the expectations, its forward five-year compound annual growth rate (CAGR) for earnings is expected to rise to 22%, versus -18.0% over the past five years.

Analysts estimate that Teradata will report an adjusted $1.97 per diluted share this year, compared to $1.31 in 2020. The following year is expected to be flat, with a consensus estimate of $1.99 per diluted share. (Source: Yahoo! Finance, op. cit.)

Teradata has been a free cash flow machine, producing a three-year high of $223.0 million in 2020, up by 137.2% from 2019.

Fiscal YearFree Cash Flow (Millions)Growth
2016$393.0N/A
2017$246.0-37.4%
2018$211.0-14.2%
2019$94.0-55.5%
2020$223.0137.2%

(Source: MarketWatch, op. cit.)

Financial liquidity is not an issue at the company. Teradata Corporation held debt of $649.0 million and cash of $684.0 million at the end of June. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Institutions and investors have been buying TDC stock. As of July, 459 institutions held a 94% interest in Teradata stock. Insiders have also been buying shares. Over the last six months, insiders added a net 354,137 shares of Teradata Corporation to their portfolios. (Source: Ibid.)

Trading at 2.8 times its consensus 2022 revenue estimate, Teradata Corporation doesn’t look stretched in the current high-valuation market and is worth a look, especially on price weakness.