Cloudera Is Flashing Some Good Buy Signals Before Earnings

The argument for Cloudera (NYSE:CLDR) is simple and yet not. On the one hand, big data is one of the hottest disciplines in the technology sector. On the other hand, CLDR stock was widely considered a stock to sell before the pandemic changed its fortunes.

Cloudera will deliver its fourth quarter and full-year 2020 earnings on March 10. In mid-morning trading the day before, CLDR stock is surging 5% suggesting that analysts expect a solid report. Currently, analysts are targeting earnings per share (EPS) of 11 cents. The whisper number suggests that the EPS could be even higher at 16 cents per share. And the forecast is for quarterly revenue of $221.43 million.

If that revenue number holds, the company will report a year-over-year gain of about 4%. And that it would also give the company a nearly 9% year-over-year gain for the full year.

More significantly perhaps, it would lead many investors to be hopeful that the company will forecast $1 billion in earnings. With a market cap that sits around $4.5 billion, $1 billion in revenue begins to make the stock look even more undervalued than it already may be at around $14 per share.

Getting Its House in Order

Cloudera took some important steps in late 2020 to get its balance sheet shored up, and to anchor its stock price. Namely the board of directors authorized the repurchase of an additional $500 million shares.

And in early January, this had the desired effect on CLDR stock. The stock climbed steadily up to a closing price of $18.99 on February 11. But the news hasn’t been as great since then. And part of that is a lukewarm outlook from the analyst community.

Analysts Are Holding Their Powder

The consensus rating of eight analysts gives Cloudera stock a hold. And with one sell rating and two buy ratings in that bunch, it’s a pretty solid hold. And the price target may have a lot to do with that.

On the one hand, CLDR stock is enjoying its highest consensus price target ($14) in nearly six months. On the other hand, the stock is currently trading above that amount.

And on the "what you have done for me recently" front, six analysts have upgraded their price target in the last six months. However, only three of those price targets are higher than its current price target.

Could Cloudera Be a Takeover Target?

Rumors have been circulating that IBM (NYSE:IBM) may be interested in buying Cloudera. The rumors began when Cloudera’s current CEO, Robert Bearden, formerly of Hortonworks, was hired in January 2020. And those rumors ramped up as the two companies announced a partnership back in June 2020.

On paper, the deal would make sense for Big Blue. With its software platform that offers both cloud and on-site hybrid cloud applications, Cloudera would push IBM close to the top in the data processing ecosystem.

Buy Cloudera On the Likelihood of Higher Revenue

Cloudera unquestionably got a boost during the pandemic as businesses needed to avail themselves of the cloud more than ever before. We can all hope to see a more normal operating environment in 2021. However, now that companies have seen what’s possible, there are many companies that will be operating some sort of hybrid work-from-home model for the foreseeable future.

And while Cloudera is not a pure-play software as a service (SaaS) company, the company does generate a significant amount of revenue from subscriptions.

Simply Wall St gives CLDR stock an intrinsic value of over $19 which would give investors a nifty 30% gain from the stock’s current price. However, the stock has failed to hold that price. But that is largely because Cloudera is a high beta stock and when the tech sector tanked, CLDR stock may be disproportionately affected.

But with revenue on the upswing, the potential for at the very least additional business through its partnership with IBM and cash on hand to deploy for its growth, CLDR stock is a stock to look at before it stops trading at a discount.