Tableau Software (DATA) stock is now 34% off its 52-week high, a large loss that has mostly occurred during the last two months.
The data analytics/visualization specialist has taken the business intelligence market by storm, but DATA’s recent loss is a reflection of the concerns surrounding ongoing competition by the likes of SAP (SAP), Qlik Technology (QLIK) and, most importantly, Microsoft (MSFT) with its Cortana Analytics revamp.
While there’s nothing wrong with being cautious, investors who buy DATA for the long haul will more than likely be rewarded big-time.
Microsoft has made recent changes to its Power BI network to create more seamless interaction between Microsoft applications; SAP has invested heavily in big data over the last few quarters; and Qlik Technology recently launched a direct competitor to Tableau and Microsoft’s Power BI with Qlik Sense.
However, investors must remember that each of these noted companies have been Tableau competitors for the last couple of years. All of these changes in the BI space are nothing more than Microsoft, SAP and Qlik trying to adapt to what Tableau Software is doing and has done better than anyone else.
The DATA Doesn’t Lie
With that said, investors, analysts, and competitors have been trying to predict the end to Tableau’s unstoppable run since it went public. Right now, investors are worried about Microsoft more than any other competitor.
I think those concerns are overblown, however, despite considerable improvements to Power BI and the Cortana Analytics platform. Tableau has had its back to the wall since day one as an underdog, a Big Data specialist competing with massive and diversified technology companies. So far, DATA has done just fine, forcing competitors to adapt while solidifying itself as both a legitimate threat and a force to be reckoned with.
I spoke with TIBCO Software’s (TIBX) CEO Vivek Ranadive last year, whose Spotfire business is a direct competitor to Tableau Software. In that interview Ranadive called Tableau Software a toy, and went on to say that DATA could probably reach $350 million in annual revenue before the market tightened up and growth suddenly stalled.
Yet, one year later, DATA now has 12-month revenue of $527 million, grew revenue 65% year-over-year, and is guiding for $630 million in revenue for the full year. So DATA’s business hasn’t exactly “tightened up” by any stretch of the imagination.
Before Tableau Software, TIBCO was the king of Big Data analytics, growing at a double-digit pace with over $1 billion in annual sales. However, Tableau’s rise essentially stopped TIBCO in its tracks, and since then no other Big data analytics company has been able to match Tableau’s impressive growth rate, whether it be Qlik, SAP or Microsoft.
Therefore, with Tableau Software continuing its growth, beating revenue expectations and raising guidance in each quarter since becoming a public company, the fact that its stock is trading at such a deep discount to 52-week highs looks like a golden investment opportunity.
Not to mention, Tableau’s growth is profitable, with it now having $71 million in free cash flow over the last four quarters, representing a massive improvement year-after-year. In other words, DATA is clicking on all cylinders and there is no reason to believe that any company can take a chunk out of DATA’s business.
All things considered, DATA now trades at 12.3 times trailing 12-month sales. Since DATA’s IPO, it has never traded at this low of a multiple to revenue.
While 12.3 times sales isn’t necessarily cheap, investors must remember that DATA’s valuation takes into account how fast the company is growing, and how large it could one day become.
At $85 per share, or 7.2 times next year’s expected revenue and five times bookings, DATA is a buy, hold and forget kind of investment opportunity.
As of this writing, Brian Nichols was long shares of Tableau Software.