There are lots of cloud stocks, but not all of them are successful. However, Cloudera is already a company of some renown and has its own wide range of clients. This company offers an enterprise data cloud for any data, from the Edge to AI. Morgan Stanley thinks that this tech company is undervalued and advises investors to buy its shares now. Analyst Sanjit Singh pointed to Cloudera’s Q2 performance. According to him, the results highlight that this company is now a much more stable business.
The company’s ARR beat the consensus estimate, accelerating to 12% year-over-year. Furthermore, its subscription revenue growth came in at 17%, also surpassing the Street’s 14.5% call. Cloudera outperformed while operating margins and cash flow, landing at 13.9% and $32 million, respectively.
Singh stated that resilience within the customer base and sharp operational execution helped management raise its FY21 subscription revenue outlook to $755-$765 million (13-15%).
The CDP Public Cloud and CDP Private Cloud have been officially launched. So, investors currently contemplate if the CDP platform becomes a key revenue driver. Thus far, the signs seem encouraging with customer count and bookings doubling in the quarter. Analysts are optimistic that CDP can enable modest improvement in growth as the spending environment recovers.
What are the stock’s other advantages?
Cloudera’s recent results highlight management’s ability to meet investor expectations and delivering key product milestones, most notably CDP. The launch of CDP will be able to sustain growth by improving retention rates and securing new customers as the spending environment improves.
Additionally, a growing focus on larger enterprises may provide leverage in the future, given their more attractive unit economics. With achievable ARR estimates, low expectations, and a new product cycle, analysts think shares are attractively valued.
Considering all these points, Singh gave this stock a Buy rating, setting a $16 price target. The shareholders could gain 46% with this price target in the next year.
Overall, Cloudera got a Moderate Buy consensus rating. With the $14.50 average price target, shares could jump 32% in the next year.