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Cloudera: Cloudy For Now

Apr. 05, 2018 8:47 PM ETCloudera, Inc. (CLDR)DATA13 Comments


  • Cloudera plunged on weak FY19 revenue guidance.
  • The cloud software company faces sales execution and focus issues that take time to remedy.
  • Stock valuation turns intriguing, as similar examples in the general sector are positive for a long-term rally.

Cloudera (NYSE:CLDR) hits all the checkpoints for current technology buzzwords with a cloud platform-focused data analytics utilizing machine learning and artificial intelligence. The stock, though, has made the same moves as Tableau Software (DATA) that once benefited from the similar Big Data buzzword and eventually crashed as well. Investors should take some notes from their recovery path.

Source: Cloudera Twitter account

Expansion Rate Problems

Cloudera produced a strong end to FY18 but gave rather weak guidance for FY19, the biggest issue being the typical growing pains that take place in the sales organization as a software company matures. The stock ended down nearly 40% on the news, providing an interesting opportunity here.

The cloud software platform had an incredible net expansion rate of 136%, suggesting the vast majority of the 41% revenue growth rate for the year came from selling more software to existing customers. Revenue growth forecasts were cut to 20% for the current year due to reasons described by CEO Tom Reilly on the FQ4 earnings call:

Hopefully it gives you a little more color on that dynamic when I mentioned new customers kind of outside our target market we have probably expanded too much effort landing seem new customers that probably don't fit our long-term profile.

In essence, the sales team spent too much time at the end of the year landing customers without the global expansion abilities for the current year. The company even expects to churn out some of these customers.

One key issue Cloudera identified in the process is that customers need data scientists in order to utilize the software and expand services. Some industries are more advanced in hiring data scientists, and the company will focus on these sectors more this year.

Source: Business Broadway

The revelation provides an opportunity for the company

ChartCLDR EV to Revenues (TTM) data by YCharts

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