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Why I'm Neutral On Cloudera Inc. Ahead Of Fourth Quarter Earnings

Mar. 06, 2020 2:52 PM ETCloudera, Inc. (CLDR)14 Comments
Kevin George profile picture
Kevin George


  • Cloudera has a strong customer base.
  • Annual revenues have shown strong growth.
  • Margins are high but quarterly growth has reached a ceiling.

Cloudera Inc. (NYSE:CLDR) will release its fourth quarter earnings on March 10th. This article will discuss the recent earnings trend and why I would remain neutral on the stock until further information emerges.

Cloudera has a strong customer base

Cloudera is an enterprise data cloud company that arrived on the stock exchange with an IPO on the 28th of April 2017. The stock floated at a price of $15.00 but now trades at $8.78. The stock has been on a good run since June 2019, where it ran from $5.70 to $12.00, before a recent pullback. Since 2010, the company has raised a $1 billion through 12 funding rounds with the latest being in April 2018.

One of the attractions to the company is a strong user base of blue-chip customers. The company boasts "8/10 of top global banking enterprises", for example, and key names on the list include the Bank of England, Mastercard, Santander, and Credit Suisse. This is a sign that the company has a good product and they now need to leverage that technology and expertise to increase profitability. Banking is the only sector the company operates in, and they also have top telco and pharma companies onboard, alongside government and manufacturing customers.

Annual revenues have shown strong growth.

The fourth quarter earnings release is expected to deliver a year-on-year increase in earnings on higher revenues when it reports on March 10. Analysts are expecting a quarterly loss of $0.04 per share, which would be a +73% change on the year. Revenues are expected to be $201.70 million, up 39.6% from the year-ago quarter.

Annual revenues are growing steadily at Cloudera with 188% growth since 2016. Cost of revenue has grown only 81% in that same period.

Although the company is losing money each quarter, it is spending

This article was written by

Kevin George profile picture
Author of "The Stock Market is Easy - How to Avoid the Pitfalls of the Average Investor".I am an active trader in stocks, FX and commodities with over 15 years' market experience. I hold a master's degree in finance and have developed a strong skill base in technical analysis.

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Comments (14)

benyboy profile picture
I like how Cloudera is offering certificates for its products. Its a great analytical tool for smart people who have experience in programming and anaylistics. Getting a company to use thier software alone is not enough. they have to hire a data analytical scientist and good Business intelligence "BI". but it all comes down to the datasets which they help with, unlike Alteryx.
Gurumentality profile picture
@benyboy Although I am in IT, I am not too familiar with Hadoop. I would think having a knowledgeable CTO would help to improve their product and achieve your advice.
benyboy profile picture
Yes sir. I agree. Most CTO are not their yet. But it comes down to cost.
Gurumentality profile picture
I know there was speculative article stating with the new CEO, the company might be bought out by either Microsoft or IBM. But it has been performing very well over the past couple months but I can't see anyone taking over Cloudera with the market in turmoil and all the massive debt in companies. Microsoft could pick up the company with a stock merger.
Regarding Cloudera getting acquired:

About two years ago, I was at an event where a veteran IT guy predicted that the three big Hadoop distributors at the time, Hortonworks, MapR, and Cloudera would all cease to exist as independent companies within five years. Within about six months of his prediction, the merger of Hortonworks and Cloudera was announced, so only two companies left. In August 2019, HPE acquired the carcass of MapR, so only Cloudera left. So if Clooudera gets acquired within the next three years (and I think it will), the guy's prediction will turn out to be correct.

The question, of course, is whether anyone will be willing to spend any significant amount of money on the acquisition of a company that nobody really needs and that hasn't proven to be viable as an independent company. There are only so many companies with more money and less common sense than they really need, and IBM already blew a big chunk on Red Hat.
Gurumentality profile picture
@embarc Well, you are correct. If not Oracle, Microsoft, and even Amazon, maybe just maybe Cloudera can maintain itself to become a leader in software.
I don't see what products or technologies Cloudera has that anyone would be willing to pay top dollar for. Take Amazon. They probably have cloud services that correspond to most of Cloudera's technologies and why would they be interested in the on-prem aspects of Cloudera. Take Impala, for instance, Cloudera's SQL-on-Hadoop product. Sometime ago, I did a lengthy product evaluation for the purpose of selecting a technology for a 100PB HDFS cluster and where the finalists were Impala and Presto. Presto won. And guess what, Amazon's Athena service is based on Presto. They basically took the source code for Presto, which is freely available as open source and turned it into a cloud service. The source code for Impala is also freely available, so I guess they could have used that code, but why pay Cloudera as much as a penny in either scenario?

Similarly, I don't see how Cloudera would be a particularly compelling acquisition for either Oracle or Microsoft.

As for Cloudera surviving as an independent company, unlikely. Computing is going to the cloud and the major cloud providers have services that are integrated with the rest of the infrastructure and that most likely obviate the need to use Cloudera's technologies there.
educandi profile picture
Neutral is probably a very bullish call in this market which shows no signing of having any reason return. The stock has broken down and now might drop another 10% in just the next few days as I don't expect much from the 3/10 earnings report to stem the downward momentum.
TechSales profile picture
Might want to read the earnings report today.
rt94103 profile picture
"Banking is the only sector the company operates in" Typo?
Kevin George profile picture
Yes, well spotted. Should've been "not the only"...
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