Cloudera, Inc.  

CLD Details 

Revenues up ~12% Year Over Year in 1QFY21: Cloudera, Inc. (NYSE: CLDR) is involved in the development and distribution of software for business data which includes storage, access, management, analysis, security, search, processing, and analysis applications.

1QFY21 Key Highlights for the Period Ended April 30, 2020: During the quarter, the company reported non-GAAP earnings of 5 cents per share compared with the year-ago loss of 13 cents. Revenues for the quarter increased 12% year over year and came in at $210.5 million, on the back of rapid adoption of its cloud-based products and services. ARR went up ~11% on pcp and stood at $723.4 million. Revenues from subscription came in at ~$187.1 million, up ~21% year-over-year, on the back of robust adoption of its cloud-based products and services. Whereas, revenues from services declined 28.4% and stood ~$23.4 million, owing to coronavirus-led worldwide lockdown. Research and development (R&D) expenses went down 4.2% on a year-over-year basis, whereas sales and marketing expenses were down 9.1% on pcp. The company exited the period with cash, cash equivalents, marketable securities, and restricted cash of $518.7 million. Operating cash flow stood at $68.4 million.

Key Financial Highlights (Source: Company Report)

What to Expect: For 2QFY21, the company expects revenues to be in the range of $206 million and $209 million, whereas, subscription revenues are projected to be in the band of $186 million and $189 million. CLDR expects non-GAAP net earnings to be in the ambit of 6 cents and 7 cents per share. For FY21, the company lowered its outlook and now expects revenues to be in the range of $825 million and $845 million, whereas subscription revenues are expected to be between $745 million and $755 million. Non-GAAP net earnings are likely to be between 26 cents to 30 cents.

Risk Analysis: The company faces stiff competition from the solutions unveiled by Amazon, Microsoft, and Google for operating big data projects on their individual public cloud platforms. Additionally, the company has made a significant investment in its Cloudera Data Platform offering, hence failure to achieve market adoption in its business may hamper results of operations and financial condition. Also, risk pertaining to foreign currency fluctuations could negatively affect its operating results. Going further, CLDR’s services business is expected to be impacted more by the COVID-19 outbreak than subscription business, which profits from a recurring revenue model.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of CLDR closed at $12.66 with a market capitalization of ~$3.74 billion. The stock is currently trading close to its 52-week high level of $13.93. The stock has delivered a positive return of ~31.33% in the last one month. Gross margin in Apr’21 stood at 74.2%, lower than the industry median of 77%. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and arrived at a price correction of single-digit (in percentage terms). Considering the valuations and risks, we suggest investors to book profit at current levels and recommend a “Sell” rating on the stock at the closing price of $12.66, up 0.16% on 23 June 2020.

CLDR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

The Goodyear Tire & Rubber Company

GT Details

Offering On-demand and On-location Qualified Vehicle Services: The Goodyear Tire & Rubber Company (NASDAQ: GT) is involved in the development, manufacturing, distribution and marketing of tires and related products and provides services worldwide. On June 8, 2020, the company stated that it is offering on-demand and on-location qualified vehicle services for Turo, via its fleet servicing platform, AndGo by Goodyear. In another update, the company announced that it is planning to construct two photovoltaic power stations at Luxembourg. The two stations will deliver ~5 GWh, annually and reduce carbon emissions by 46.3 tons, thereby providing clean energy for ~1,200 households for the next 20 years.

1QFY20 Operational Highlights for the Period Ended 31 March 2019:  During the quarter, the company delivered adjusted loss per share of 60 cents as compared to earnings per share of 19 cents reported in the year-ago period, owing to lower revenues across all segments. The company reported an adjusted net loss of $140 million, as compared to a net income of $45 million in the year-ago period. Revenues for the quarter stood at $3,056 million, as compared to $3,598 million reported in 1QFY19. The year-over-year softness was due to lower industry volume and unfavorable foreign currency translation. Tire volumes in the first quarter went down 18% year over year and came in at 31.3 million units. The company exited the period with a cash balance of $971 million and long-term debt and finance leases amounting to $5.21 billion.

Key Financial Highlights (Source: Company Reports)

Risk Analysis: Lower demand following shelter-in-place orders and strong declines in consumer confidence amid the coronavirus pandemic are weakening the company’s margins. Further, foreign exchange fluctuation and stiff competition in the market adds to the woes. The company has suspended its quarterly dividend due to the uncertainty caused by the coronavirus outbreak.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of GT closed at $8.82 with a market capitalization of ~$2.1 billion. The stock made a 52-week low and high of $4.09 and $17.2 and is currently trading at the lower band of its 52-week trading range. The stock went up by 23.62% and 67.37% in the last one month and three months, respectively. The company benefited from the strength of its brand, new product introductions, followed by new distributions strategies. We have valued the stock using the EV/Sales multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). Considering the aforesaid facts, current trading levels, recent price movements and the company’s brand presence, we recommend a ‘Buy’ rating on the stock at the closing price of $8.82, up 3.16% as on 23 June 2020.

GT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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