Summer is notoriously tough on technology, particularly for position traders. But, for long-term holders and short-term renters, the market is offering up opportunities in fast growth plays tied to big data, including Teradata (NYSE:TDC).
Teradata shares have taken investors on volatility rise this month. When the company beat The Street's estimates by 7% on May 3rd, shares jumped 10% higher. However, J P Morgan's (NYSE:JPM) mea culpa and Cisco's (NASDAQ:CSCO) European worries drove the stock down 18.5% to its low on May 18th. Since then, a move back up to just shy of $70 has investors wondering "what next?"
Data management grows up.
Recently, I've written a fair amount about big data. Enterprises are embracing solutions aimed at breaking down legacy data silos. Where data was once locked away in vaults by business unit, C-level executives are finally shifting their focus to a more comprehensive, unified and accessible plan.
Two years ago, reducing server footprints was all about saving money. Today, the goal has become much more comprehensive. Sure, enterprises are still attracted to solutions allowing them reduce spending on equipment, maintenance and utilities, but, they also want security, unification, access and most importantly, sales-boosting data mining tools. These C-level goals have invigorated a trend toward real time analytics, such as those provided by Teradata and bolstered by the company's acquisition of Aster last year.
Sales reflect strengthening demand.
Customer's are voting in favor of Teradata's approach, driving Q1 sales up 21% to $613 million. The sales came in at the second highest level in the company's history, as product revenue increased 31%. Sales upside provided leverage too, with operating margins improving to 23.9% from 22.7% last year.
Sales were strong across the globe, with America's up 26% to $388 million. Despite European struggles, the EMEA region saw 9% sales growth to $136 million, and Asia Pacific and Japan grew 20% to $89 million. Sales should continue higher as the company bulks up its sales team, with an expected 35-45 new territories coming online this year.
The company's acquisition of Aprimo, a cloud-based marketing management company, and eCircle, a digital marketing firm, strengthen the company's marketing offering in both the United States and Europe. This is critical to the company's plan, given Teradata estimates up to 45% of all big data implementation and as many as 70% of its customer accounts are tied to marketing initiatives.
So, while big data technology companies are likely to volatile through summer, those interested in companies with faster than market growth should consider using waves to build up exposure. Particularly, if you agree IT spending will continue to embrace offsite data solutions.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in (TDC) over the next 72 hours.