On Tuesday, Evercore ISI adjusted its price target for Teradata Corporation (NYSE:), a cloud-based data analytics company, reducing it to $58 from the previous $65. The firm maintained its Outperform rating on the stock. This change follows Teradata’s fourth-quarter results, which were a mix of hits and misses against analyst expectations.
The company reported fourth-quarter revenue of $457 million, a modest year-over-year increase in constant currency (c/c) terms, falling slightly short of Evercore ISI’s projection of $461.4 million but surpassing the consensus estimate of $455.8 million. Teradata’s total Annual Recurring Revenue (ARR) grew by 5% in c/c to $1,570 million, again missing Evercore ISI’s forecast of $1,587 million but coming in just under the consensus of $1,578 million.
Earnings per share (EPS) for the quarter were a positive surprise at $0.56, outpacing both Evercore ISI and consensus estimates, which stood at $0.50 and $0.51 respectively. However, the company’s cloud ARR increase of 48% to $528 million did not meet management’s guidance of 53-57% growth. This shortfall was attributed to the delay of a significant cloud ARR deal and several smaller deals into 2024, contributing to a roughly 15% drop in Teradata’s share price in after-hours trading.
For the fiscal year 2024, Teradata has set cloud ARR growth guidance at 35-41% in c/c, which is somewhat below the anticipated range of approximately 40-42%. Despite this, Evercore ISI suggests that the guidance might be conservative, providing a stable foundation for future growth. The firm also noted that two major on-premise customers are phasing out their use of Teradata’s platform, which is expected to negatively impact total ARR by 4-5% quarter-over-quarter in the first quarter of 2024. Nevertheless, management considers the first half of 2024 erosion as an anomaly, with recent erosion rates stabilizing.
Evercore ISI highlighted that Teradata’s current share valuation reflects execution risks and that the company is still positioned to attract new cloud workloads over the next 6 to 12 months. This is due to a strong base of existing on-premise customers and the potential of its VantageCloud Lake and ClearScape Analytics products. However, the firm anticipates that the stock may not see significant movement in the upcoming quarter as management addresses go-to-market challenges. The new price target is based on a 14x multiple of the expected enterprise value to CY25 free cash flow and a 23.5x multiple of CY25 earnings per share.
As Teradata Corporation (NYSE:TDC) navigates its mixed fourth-quarter results and sets its sights on future growth, real-time data from InvestingPro provides further context to the company’s financial health and market performance. With a Market Cap of $4.77B and a P/E Ratio of 79.33, Teradata trades at a premium compared to many of its peers, reflecting the market’s optimism about its earnings potential and strategic initiatives.
InvestingPro Tips suggest that Teradata’s management has been actively engaged in share buybacks, signaling confidence in the company’s value proposition. Additionally, analysts have revised their earnings estimates upwards for the upcoming period, indicating potential for better-than-expected financial performance. However, it’s worth noting that the company operates with a moderate level of debt and that short-term obligations exceed its liquid assets, which could be a point of consideration for risk-averse investors.
For those interested in a deeper dive into Teradata’s prospects, there are currently 13 additional InvestingPro Tips available, which can be accessed at: https://www.investing.com/pro/TDC. These tips provide valuable insights into the company’s shareholder yield, net income growth expectations, and trading multiples, which could be instrumental in making informed investment decisions. To gain access to these insights, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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