Cloudera Makes a Decent Buy, Arranges Term Loans and Hits Price Targets

It's not always clear what makes a company great, let alone a great buy. Recently, though, Cloudera (NYSE:CLDR) has made some major moves in that vein, picking up new capital and working to improve its share price via some comparatively familiar measures. These measures together add up to a reasonably sound strategy for the company, especially in the short term, and doubly so given its current share price.

Moves and Countermoves

One of the biggest things Cloudera has done in the last several days is arrange a new term loan. The move will provide the company with $500 million in new operating capital, which the company plans to use for “general corporate purposes,” among other things. One of the other things in question will be especially welcome to investors, as the company is planning a stock buyback with the borrowed money. Such a move will, commonly, increase the stock price as the company calls its paper home, which leaves less paper in the field to be bought up.

Another stock-related milestone recently hit for Cloudera, as the company managed to beat the average 12-month price target of $13.78 recently. The company crossed the $14.64 per share mark, and is currently a little above that, suggesting that modifications to price targets are likely to come forward. That's another point likely to give share prices an extra goose in the interim. The next earnings report for Cloudera isn't set to arrive until early March of 2021, reports note, so any gains on this front are likely to be speculative in the near-term.

Less Certain Analysts Elsewhere

Our latest research, meanwhile, shows an analyst community that's a bit more concerned with the stock's near-term outcome as a whole. The company is currently under a consensus rating of “hold”, with one “sell” rating, five “hold” and four “buy” going into the mix. That's a little better than it's been in six months, though, as up until today, the company has held a ratio of one “sell” rating, eight “hold” and five “buy” for that whole time. It's not exactly encouraging that the company's gains in ratio have largely resulted from “hold” ratings leaving the pool altogether—and taking one “buy” with them—but the motives could be worse.

Additionally, the price target has been sliding upward for the last six months as well. Starting out at $11.85, it's increased to $12.69, where it stayed for nearly three months before increasing to $13.73, which is slightly below the average 12-month price target established elsewhere, but no less a milestone. Interestingly, those price targets were only recently adjusted; back on December 4, three different analysts increased their price targets on the company. There had been no such adjustments before that prior to September 3.

A Surprisingly Good Short-Term Buy

Taking what we know so far into account, there are actually several good reasons to make this a buy, if a cautious one, and one that will need to be watched fairly closely going forward. We know that the company has just brought a big slug of new capital in, and is planning to use an unknown percentage of it to buy its own stock. Given that its own stock is hovering down in the “large pizza” range per share, it could take even just half of that big new slug and run up the price a good deal. Those who owned shares now, therefore, would take advantage of that run-up.

Additionally, we know that the company has at least some ability to stand on its own two feet. We know that, a couple weeks back, Moody's gave Cloudera a Ba3 Corporate Family Rating, and the $500 million term loan got a similar rating. That's enough to put a floor of stability under the company's overall operations.

Moreover, it's been making some sound moves in the field. It went from being a Hadoop distributor to being a complete cloud storage operation for enterprise data. With cloud operations being at a premium these days thanks to the growing work-from-home movement—which is, in turn, backed up by a lot more things from-home thanks to ongoing coronavirus responses from the various governments out there—anyone with skin in this particular game stands to come out ahead.

So yes, buy Cloudera. Be prepared to sell it at the drop of a hat, too, but buy Cloudera. The short-term prospects look fantastic given that there's a buyer with up to half a billion bucks on hand ready to pick up shares, which should pick up share prices as well according to all the basic laws of economics. How long those gains will last is anyone's guess; a presence in cloud does it well, as does past performance, but without that artificial prop of a big loan and buybacks on hand, the gains could slip fairly quickly.