Cloud computing and enterprise data connectivity platform Cloudera, Inc. (CLDR) has gained 50.4% over the past year, driven by the rapid adoption of remote working across the world. This trend is expected to continue in 2021 and beyond, as analysts expect CLDR’s earnings to rise 60% year-over-year in the quarter ended April 2020, and 30.8% next year.
However, investors are rotating away from tech stocks to capitalize on the rebounding outdoor industries. This has resulted in CLDR stock dipping 9.6% year-to-date. The current stock price decline as part of a broader industry sell-off is expected to be short-lived, as businesses continue to invest heavily in cloud computing technology.
Here’s what could drive CLDR’s performance in the near term:
Future of the Cloud Computing Industry
The cloud computing industry has proven to be a disruptive technology enhancing the efficiency of nearly all sectors worldwide. Though the pandemic precipitated the adoption of a cloud-powered work environment, the trend is likely to continue in post-pandemic. With the global digitization drive accelerated by the adoption of 5G, cloud computing is expected to be the center of the post-pandemic hybrid working model. Worldwide end-user spending on public cloud services is expected to rise 18.4% year-over-year to reach $304.90 billion in fiscal 2021. Approximately 14.2% of the total global enterprise IT spending is projected to be dedicated towards cloud adoption, up 510 basis points from the year-ago value.
As a relatively well-known cloud data platform in the technology space with a market capitalization of $3.68 billion, CLDR has been leveraging its market reach to strengthen its foothold in the industry. Its Cloud Data Platform (CDP) was launched in Google Cloud on March 31, allowing the company to offer its enterprise data platform on a global scale. CLDR already manages data for the majority of the top 100 companies included in the Fortune 500 list. Earlier in March, CLDR’s CDP operational database was launched on Microsoft Corporation’s (MSFT) Azure and Amazon.com, Inc.’s (AMZN) Amazon Web Services.
Robust Liquidity and Balance Sheet Strength
CLDR’s trailing-12-month total debt came in at $679.57 million, accounting for 36.3% of total capital. The company has reported strong cash flows over the last year, thereby reducing the credit risk. Its trailing-12-month net operating cash flow and levered free cash flow, stood at $155.28 million and $283.21 million, respectively. CLDR’s debt-to-free cash flow ratio is 1.72.
CLDR’s trailing-12-month current and quick ratios are 1.5 and 1.38, respectively, indicating optimal working capital management.
Trading at a Discounted Valuation
In terms of forward EV/sales, CLDR is currently trading at 3.92x, 8.7% higher than the industry average of 4.29x. The stock’s forward EV/EBITDA ratio of 15.32 is 12% lower than the industry average of 17.41.
Additionally, CLDR’s forward price/book and price/cash flow multiples of 3.26 and 25.78 compare favorably with the respective industry averages.
Consensus Rating and Price Target Indicate Potential Upside
Of the nine Wall Street analysts that rated CLDR, two rated it Buy while seven rated it Hold. The stock’s median 12-month price target of $15.71 indicates a potential upside of 24.4%. The price targets range from a low of $12.62 to a high of $21.
POWR Ratings Reflect Promising Outlook
CLDR has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
CLDR has a grade of B for Growth, Value, and Quality. CLDR’s revenues and total assets have increased at CAGRs of 32.7% and 49.4%, respectively, over the past three years, justifying the Growth grade. The company’s trailing-12-month gross profit margin of 78.2% and relative undervaluation justify the Quality and Value grades.
Of the 61 stocks in the Software – Business industry, CLDR is ranked #15. In total, we rate CLDR on eight different levels. Beyond what we’ve stated above, you can view additional CLDR Ratings for Stability, Sentiment, and Momentum here.
There are 17 other stocks in the Software – A business industry with an overall rating of A or B. Click here to view them.
Bottom Line
CLDR is poised to grow exponentially in 2021, given its recent expansion to three of the biggest global cloud computing platforms that account for the majority of the data traffic. Thus, the recent price dip provides the perfect entry point in the stock.
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CLDR shares were trading at $12.57 per share on Friday afternoon, down $0.06 (-0.48%). Year-to-date, CLDR has declined -9.63%, versus a 9.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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