Cloudera (CLDR - Free Report) shares have jumped 36% in the past three months after it topped our second quarter estimates in early September. Despite the recent climb, Cloudera stock has been hammered since it went public April 2017.
Now the question is should investors take a chance on the cloud computing stock that is trading under $10 per share heading into the release of its Q3 fiscal 2020 financial results on Thursday, December 5?
Cloudera is an enterprise data cloud firm that works to provide big data solutions for businesses. The company officially completed its merger with enterprise data peer Hortonworks, Inc. back in January 2019 to help create a more competitive company in a market dominated by the likes of Microsoft (MSFT - Free Report) , Google (GOOGL - Free Report) , and Amazon (AMZN - Free Report) .
With this in mind, CLDR announced in early November its Cloudera Data Platform is available on Microsoft Azure, which could help it expand its reach. However, Cloudera had already scared off many investors when it said in June that CEO Tom Reilly would retire just five months after the Hortonworks merger. The news coincided with a rough first quarter for the already-struggling firm.
Since then, Cloudera has experienced some positivity, some of which came from Carl Icahn. The firm announced in August that it reached a deal with the activist investor that put two of his representatives on CLDR’s board.
The move, which came several weeks after Icahn announced his roughly 13% ownership stake in the beaten-down enterprise cloud firm, marked a “standstill” agreement that might have helped stop a proxy challenge. Investors should note that Cloudera “believes the Icahn Group beneficially owns approximately 18.36%” of its outstanding stock.
Icahn seemed to set his sights on one of the few “cheap” cloud computing stocks on the market. CLDR stock is currently trading at 3.3X forward 12-month Zacks sales estimates, which marks a discount against its industry’s 6.1X average, Dropbox’s (DBX - Free Report) 4.1X, Salesforce’s (CRM - Free Report) 7.1X, and far better than ServiceNow’s (NOW - Free Report) 12.3X.
However, Cloudera stock might be called a valuation trap, since it is artificially inflated by CLDR’s downturn since going public. CLDR shares closed regular trading Monday at $9.78 per share, well off their 52-week highs of $15.
Q3 Outlook & Beyond
Looking ahead, the Palo Alto, California-based firm’s Q3 fiscal 2020 revenue is expected to surge 60% from the year-ago period to reach $188.8 million, based on our current Zacks Consensus Estimate. This includes the positive impact of the Hortonworks merger.
The company’s full-year fiscal 2020 sales are then expected to jump 62%, with 2021 projected to come in 10% above our current-year projection at $845.40 million.
At the bottom end of the income statement, CLDR’s adjusted quarterly earnings are projected to fall from a loss of -$0.03 per share in Q3 2019 to -$0.07 per share. On the positive side, the company’s full-year ESP figure is projected to climb from -$0.41 to -$0.23. Better still, Cloudera’s adjusted fiscal 2021 loss is expected to come in at just -$0.05 a share.
Cloudera is currently a Zacks Rank #4 (Sell), based mostly on a slight downturn in its longer-term earnings outlook. The company is still expected to expand within a growth industry and at least one established outsider has shown some faith in the firm recently.
Therefore, investors who can handle some risk might want to think about buying some shares of Cloudera before it reports after the closing bell on December 5. Others might want to scoop up the cheap tech stock if it is able to impress Wall Street like it did last quarter.
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