Sunday, 3 March 2024


Teradata shares price target cut to $58 by Evercore ISI By

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On Tuesday, Evercore ISI adjusted its price target for Teradata Corporation (NYSE:), a cloud-based data analytics company, reducing it to $58 from the previous $65. The firm maintained its Outperform rating on the stock. This change follows Teradata’s fourth-quarter results, which were a mix of hits and misses against analyst expectations.

The company reported fourth-quarter revenue of $457 million, a modest year-over-year increase in constant currency (c/c) terms, falling slightly short of Evercore ISI’s projection of $461.4 million but surpassing the consensus estimate of $455.8 million. Teradata’s total Annual Recurring Revenue (ARR) grew by 5% in c/c to $1,570 million, again missing Evercore ISI’s forecast of $1,587 million but coming in just under the consensus of $1,578 million.

Earnings per share (EPS) for the quarter were a positive surprise at $0.56, outpacing both Evercore ISI and consensus estimates, which stood at $0.50 and $0.51 respectively. However, the company’s cloud ARR increase of 48% to $528 million did not meet management’s guidance of 53-57% growth. This shortfall was attributed to the delay of a significant cloud ARR deal and several smaller deals into 2024, contributing to a roughly 15% drop in Teradata’s share price in after-hours trading.

For the fiscal year 2024, Teradata has set cloud ARR growth guidance at 35-41% in c/c, which is somewhat below the anticipated range of approximately 40-42%. Despite this, Evercore ISI suggests that the guidance might be conservative, providing a stable foundation for future growth. The firm also noted that two major on-premise customers are phasing out their use of Teradata’s platform, which is expected to negatively impact total ARR by 4-5% quarter-over-quarter in the first quarter of 2024. Nevertheless, management considers the first half of 2024 erosion as an anomaly, with recent erosion rates stabilizing.

Evercore ISI highlighted that Teradata’s current share valuation reflects execution risks and that the company is still positioned to attract new cloud workloads over the next 6 to 12 months. This is due to a strong base of existing on-premise customers and the potential of its VantageCloud Lake and ClearScape Analytics products. However, the firm anticipates that the stock may not see significant movement in the upcoming quarter as management addresses go-to-market challenges. The new price target is based on a 14x multiple of the expected enterprise value to CY25…

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