Analyst On Cloudera: 'Straw That Broke The Camel's Back'

Cloudera Inc CLDR announced multiple disappointing metrics and business updates in its fiscal first-quarter results, which prompted a 40-percent decline in the stock.

Cloudera said it lost 13 cents per share in the quarter on revenue of $187.5 million, versus expectations of a 23 cent per share loss on revenue of $188.4 million

The Analysts

Wells Fargo's Philip Winslow maintains a Market Perform rating on Cloudera's stock with a price target lowered from $12.50 to $8.

Wedbush's Daniel Ives maintains at Neutral, price target lowered from $16 to $7.

Shares of Cloudera were trading lower by more than 40 percent Thursday and hit a new 52-week low of $4.95.

Wells Fargo: 'Disappointing' Results

Winslow highlighted that billings of $149.6 million versus the Street's estimate of $171.4 million while recurring and deferred revenue both fell short of consensus estimates. The company showed an "unprecedented" 16 percent dollar churn in the quarter versus a historical average of 10 percent.

Management also lowered full-year fiscal 2020 total revenue, subscription revenue, operating cash flow and ARR growth metrics.

The company highlighted two main headwinds in bookings with existing customers who account for around 90 percent of revenue growth, including:

1. Uncertainty created by the Hortonworks merger.
2. Customers postponing contract renewals as they're waiting for the full release of the Cloudera Data Platform.

Related Link: The Street Reacts To Cloudera's Q4 Earnings, Concerning Guidance

Wedbush: Camel's Back Is Now Broken

The combination of Cloudera's "soft" quarter, "jaw dropping weak" guidance, and the announcement that CEO Tom Reilly is retiring represent the "straw that broke the camel's back," Ives wrote in a note. Heading into the report, the company has shown "some steady progress" in integrating Hortonworks but it's now evident the "wheels came off the bus" amid sales execution issues, secular headwinds on the Hadoop market, along with cultural challenges.

Reilly's departure now creates a void in managers who can lead the company through the "massive" transformation and this is now a major concern. The analyst said it's possible the "story is broken" and the next strategic move forward is unclear.

The Street will now debate if Cloudera remains a standalone entity and hope it can generate synergies to turn itself around over the next 12-18 months. On the other hand, a hypothetical strategic buyer might be interested in Cloudera's properties as its combined assets could be worth $9-$11 per share.