One would think any company in the cloud computing market right now would be a market darling. Indeed, with the word “cloud” in the moniker, one would think Cloudera Inc (NYSE:CLDR) a bulletproof name, with Cloudera stock being perpetually hoisted higher.
One would be wrong though. After gaining nearly 5% in Tuesday’s regular-hours session, Cloudera stock plunged more than 30% on Wednesday. The prod? A disappointing 2018 outlook.
Or, maybe it was something more. Maybe, just maybe, investors are starting to realize Cloudera is a small, young company trying to penetrate a crowded field where bigger and better-funded competition already exists, or could exist with just one simple decision from one of dozens of any other cloud computing players.
The numbers, relatively speaking, were great. Revenue of $103.5 million was not only up 42% year-over-year, it topped expectations of $98.7 million. The operating loss of ten cents per share of Cloudera stock was decisively better than the loss of 23 cents per share analysts had modeled.
It was a right time, right place kind of quarter. As CEO Tom Reilly explained “Most enterprises are just embarking on their digital transformation journeys. In a rapidly evolving and disruptive market, we believe the investments we’ve made have us well-positioned to lead them on that journey.”
And he’s right. But, the pace of the journey is expected to slow down dramatically this year.
After growing nearly 41% for fiscal 2018 ending in January, the company is only calling for revenue growth on the order of 20% this year. Specifically, Cloudera is looking for a top line of between $435 million and $445 million for the year now underway. Analysts had been modeling a top line of $460.5 million, presuming its previous growth rate would be maintained.
CFO Jim Frankola (somewhat) explained during the earnings conference call, “The cohorts that represent our largest customers are still growing at roughly 136%. So the land and expand model is really working. What we saw in late Q4 is some softness and expansion bookings … As we look at the changes that we’re putting in for the first half of next year we expect that to impact our bookings for the first half, which will eventually reflect in billings and revenue for the year.”
Investors couldn’t quite embrace the idea that the previous sales plan was working. yet significant changes were still being made.
Cloudera Stock’s Exciting Story
That’s the superficial explanation anyway. If investors are willing to take a good, honest look in the mirror though, they may find an alternative explanation. The only viable bullish thesis is assuming the market loves CLDR a little more in the near future than it did in the recent past.
It’s a strategy that tends to only work in a hype-filled environment though. When the broad market is fighting a losing battle as it is now, the glass is generally seen as half empty. That’s true regardless of the stock’s story. Cloudera stock was no exception.
There’s also no denying early investors were hoping to catch a little initial public offering lightning in a bottle.
Cloudera became a publicly-traded entity last April. At that time, the market was roaring, and with IPOs from high-profile names like Snap Inc (NYSE:SNAP) and Blue Apron Holdings Inc (NYSE:APRN) then just around the corner, investors were sure 2017’s batch of newly-trading stocks would each help propel the other higher. Throw in the fact that Intel Corporation (NASDAQ:INTC) was a key owner early on, and the bullish case for Cloudera stock held plenty of water.
The funny thing about initial public offerings is — in general — the longer a bull market lasts and the longer an economic expansion lasts, the less impressive new companies end up being. Cloud-based data analysis and modeling platforms like the one Cloudera brings to the table aren’t exactly new or unique.
They sure made for an exciting story a year ago, though.
Bottom Line for Cloudera Stock
Truth be told, in the same sense the bulls got a little too excited about Cloudera in 2017, the sellers are more than a little overzealous with their mass dumping of Cloudera stock now. This is still a viable company. Clearly there are an increasing number of customers coming to it for help doing something constructive with the mountains of data they’re collecting now.
Still, in light of the sheer drubbing Cloudera shares are taking today, this is clearly a stock that’s got perception problems. Investors are not only shocked, they almost appear angry. Interested bargain-hunters may want to make sure the selling has cooled off and that the company’s chiefs are offering convincing, plausible outlooks about future results before wading in.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.