Teradata Corporation’s Price Target Adjusted by Evercore ISI, Maintains Outperform Rating
Evercore ISI, a leading investment banking advisory firm, has adjusted Teradata Corporation’s price target to $58 from the previous $65. Despite this adjustment, Evercore ISI maintains its Outperform rating on the stock. The price target adjustment comes following Teradata’s fourth-quarter financial results, which presented a mixed performance compared to analyst expectations.
In the fourth quarter, Teradata reported revenue of $457 million, showing a modest year-over-year increase in constant currency terms. While this fell slightly short of Evercore ISI’s projection of $461.4 million, it surpassed the consensus estimate of $455.8 million. Teradata’s total Annual Recurring Revenue (ARR) also experienced growth, increasing by 5% to reach $1,570 million in constant currency. However, this missed Evercore ISI’s forecast of $1,587 million and was slightly below the consensus of $1,578 million.
Surprisingly, Teradata’s earnings per share (EPS) for the quarter came in at $0.56, outperforming both Evercore ISI’s estimate of $0.50 and the consensus estimate of $0.51. Despite this positive result, Teradata’s cloud ARR growth of 48% to $528 million failed to meet management’s expectations of 53-57% growth. This was primarily due to the postponement of a significant cloud ARR deal and several smaller deals to 2024, resulting in a 15% decrease in Teradata’s share price in after-hours trading.
Teradata Sets Lower Cloud ARR Growth Target for Fiscal Year 2024
Looking ahead to fiscal year 2024, Teradata has set a cloud ARR growth target of 35-41% in constant currency, which is lower than the previously anticipated range of approximately 40-42%. Evercore ISI suggests that this guidance might be conservative, potentially providing a solid foundation for future growth.
In terms of stock valuation, Evercore ISI believes that Teradata’s current valuation reflects execution risks. However, the firm also believes that Teradata is well-positioned to attract new cloud workloads in the next 6 to 12 months, thanks to its strong existing customer base and the potential of its VantageCloud Lake and ClearScape Analytics products. Nevertheless, significant stock movement may not be immediate as management focuses on overcoming go-to-market challenges. The new price target is based on a 14x multiple of the expected enterprise value to CY25 free cash flow and a 23.5x multiple of CY25 earnings per share.
Investor Insights and Considerations
According to InvestingPro Insights, Teradata Corporation currently has a market cap of $4.77B and a P/E ratio of 79.33, indicating that it trades at a premium compared to many of its peers. This suggests market optimism about the company’s strategic initiatives and earnings potential. Teradata’s management has also been engaged in share buybacks, which signals confidence in the company’s future. Additionally, there have been upward revisions in earnings estimates for the upcoming period, indicating the potential for better-than-expected financial performance. However, investors who prioritize risk management should consider Teradata’s moderate debt level and the fact that its short-term obligations exceed its liquid assets.
Analyst comment
Positive news: Teradata Corporation’s price target has been adjusted slightly downward by Evercore ISI, but the firm maintains an Outperform rating on the stock. Teradata reported strong EPS for the fourth quarter, beating estimates. The company also has a solid customer base and potential for future growth. However, the stock price dropped due to missed cloud ARR growth expectations. The market may not see significant movement as the company focuses on go-to-market challenges. The P/E ratio suggests market optimism, but investors should consider the company’s debt level and short-term obligations.
