Carl Icahn Takes Stake In Cloudera, But Wells Fargo Says Outlook Still Murky

After Thursday’s market close, an SEC filing disclosed that activist investor Carl Icahn had taken an aggregate 12.6% stake in software company Cloudera Inc CLDR.

Although the stock valuation is near trough levels, there is uncertainty around a key catalyst, according to Wells Fargo: customer adoption of the Cloudera Data Platform. 

The Analyst

Philip Winslow maintained a Market Perform rating on Cloudera and set an $8 price target. 

The Thesis

Although Icahn may wish to unlock shareholder value, there are factors that limit the potential, Winslow said in a Thursday note. (See his track record here.) 

Prior to Cloudera’s merger with Hortonworks, the two companies were approached separately by private equity investors to combine the entities, the analyst said, adding that Hortonworks was also approached by a strategic buyer about an acquisition. 

“Although these transactions did not ultimately transpire, we believe this prior interest underscores the potential value of the new Cloudera in terms of its leadership position in the Hadoop/Spark ecosystem,” he said. 

Icahn may try to re-engage with strategic or financial acquirers to sell Cloudera, Winslow said.

The company witnessed an unprecedented 16% dollar churn in the first quarter, significantly higher than its historical average of 10% or less, the analyst said. 

The company expects this high churn level to continue during the second quarter, he said.

Such a high level of revenue attrition could dissuade both financial and strategic acquirers, according to Wells Fargo.

The cloud data platform has yet to be released as a cloud-native service and as a private cloud offering, and customer adoption is uncertain, Winslow said. 

Price Action

Cloudera shares were trading higher by 2.91% to $6.54 at the time of publication Friday. 

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Photo courtesy of Cloudera.