The market action that followed Cloudera (NYSE:CLDR) and its recently-released earnings report makes it clear that sometimes, even when everything goes right, things can still go wrong. Beats on both earnings and revenue weren't enough to give Cloudera much edge in the market as some disappointing projections sent the stock crashing downward in premarket and early-market trading.
Last Quarter Packed With Good News
Cloudera's last quarter, as suggested by its earnings report, turned out well by nearly any standard. The company posted earnings per share of $0.15, well ahead of the consensus estimates from Zacks looking for $0.11 per share. Good news by itself, but even better, it's almost four times better than what the company did a year ago at the same time, bringing in $0.04 per share.
Revenue turned out similarly solid, as the total revenue of $226.56 million beat consensus estimates by a decent 2.49% margin. It also nicely beats the figures from the same time last year, which came in at $211.72. These aren't dramatic wins, of course, but they're certainly significant enough to be taken seriously. Better still is the revelation that these aren't fluke numbers, but rather, this is the fourth consecutive quarter that Cloudera has beaten consensus revenue estimates.
Here, though, is where the downside kicks in. Cloudera projected that it would see revenue between $216 million and $218 million, with earnings per share figures of $0.07 to $0.09. Not exactly great, especially against the last quarter, but hardly a loss, either. The problem is that consensus figures were looking for $227 million in revenue and earnings of $0.02 per share. The full-year figures looked worse, meanwhile, with the company looking for between $907 million and $927 million in revenue and earnings per share between $0.35 and $0.39. Consensus estimates were looking for $945 million in revenue and $0.48 per share in earnings.
Slipping Sentiment Bottoming Out
The analyst community, meanwhile—as based on our latest research—is increasingly unsure of Cloudera's overall fate. While the company is a consensus “hold”, and has been for six months, sentiment has been turning increasingly bearish for the company up until the present day.
Six months ago, the company had one “sell” rating, eight “hold” and five “buy” to its credit. That improved substantially three months ago to one “sell”, five “hold” and four “buy.” A month ago, though, a clear slide began as the ratios were one “sell”, five “hold” and only two “buy,” which is where we stand today.
The price target, meanwhile, has been generally moving upward with some hiccups along the way. Six months ago, it stood at $12.69, before increasing to $13.73 three months ago. A month ago, that improved to $13.44, before improving once more to $14, where it sits today. Recent movement from the analyst pool has been light, with three analysts in the last four months boosting their price targets. In fact, back in late February, Barclays bumped up its price target from the current consensus of $14 to $19 per share, which does suggest Barclays sees positive developments coming, at least.
Solid Potential Under the Right Circumstances
Cloudera, two or three years ago, would have seemed like a can't-miss proposal. Since Cloudera's primary focus is on enterprise software platforms, it should have ticked all the right boxes for investors looking for a future-facing operation. Cloudera's focus on data engineering and warehousing, machine learning, and analytics—both cloud-based and on-premises—should have been a winner. The last year, though, has taken some of the wind out of these sails. Analytics, for example, still has a use with online shopping, but has much less value when physical stores are closed. Having an analytics program geared toward tracking foot traffic becomes next to meaningless when you're only allowed a few shoppers a day by government mandate.
There's also the issue of data engineering; the reduction of impact on physical analytics delivers a blow to an entire sector of data engineering. When there is no data, or minimal data, being generated, what point is there in building a framework to move that data from one place to another for analysis? It's like building a dam across a dried-up river.
There's still room for opportunity at Cloudera, though, but it's going to take some heavy marketing to bring it into play. The ongoing surge of online shopping and e-commerce will call for a new push into analytics in that sector. The more that Cloudera can do to demonstrate its relevance in this sector, the better off it's likely to be going forward. The news isn't that great, especially in the short term, but if Cloudera can effectively pivot and demonstrate its worth in this new environment—which may be around for some time to come—it stands a good chance of delivering its own recovery.
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