Cloudera Inc (NYSE:CLDR) may be evolving to the cloud for better services, but the stock is going the opposite direction. The firm announced various actions in December to deflect attention from the tumbling share price. Among them is the decision to merge with Hortonworks which will depend on the result a shareholder vote late December.
In mid-October, the stock breached both the 200-day and the 50-day moving average support on the same day. What followed is a series of huge falls weak gains. As a result, the stock has been trading under both moving averages for over two months.
The stock exhibits subdued strength with the RSI fluctuating wildly for the last two months. Although it is yet to enter a definite bear market, any further plunge in price and the bears win.
Interestingly, the share price jumped a little in December perhaps due to strong financial figures. Early December, Cloudera released the third quarter results for FY2019. In the results, most of the indicators were positive. In particular, the firm registered a 25% year-over-year increase in the quarter.
Besides, subscription revenue increased 28% year-over-year to $99.7 million. This is on the back of an increase in the number of customers spending over $100,000 annually. Further, the gross revenue surge is courtesy of the strategic shift of the firm from Hadoop to cloud-based machine learning.
But perhaps the highlight of the month is the plan to merge operations with Hortonworks. According to Cloudera, the only remaining hurdle to the merger is the shareholder vote. The Federal Trade Commission already signed the plan off. The firm said that the merger would happen immediately after the vote if the outcome is positive.
While releasing the Q3 results, Cloudera’s management said the performance is a vindication of sound strategy. In particular, Tom Reilly, the chief executive officer said he was pleased with their execution in the quarter. Further, he commented that the planned integration with Hortonworks was well underway. Most importantly, Reilly notes that the customers are receiving their planned strategy with a lot of positivity.
What this means is that the equity market may be overreacting to the overall plunge in the stock market. Investors are jittery that the ongoing US-China trade war might hurt the stock market further. Interestingly, the month of November saw the equities enter the corrective price action zone. In the last week of November, all indices (Nasdaq, S&P 500 and Dow Jones Industrial Average) were all negative. Particular, the indices were -6.3%, -2.9% and -3.3% respectively.
However, there is a reason for investors to be hopeful. Cloudera’s strategy is solid and may see the stock climb exponentially in the coming months. Apart from the merger talks with Hortonworks, other positive developments should boost the revenue.
In particular, the firm recently announced that Bombay Stock Exchange (BSE) is the latest user of Cloudera Enterprise. Interestingly, BSE is one of the oldest stock exchanges in Asia and has astronomic data demands. Cloudera Enterprise will empower the stock exchange with “real-time analytics while improving data governance and maintaining compliance with the latest industry Service-Level Agreements (SLAs).”
The last two months are dark for the equities globally. However, Cloudera has a solid strategy which, given time, will deliver high revenue. Further, if the merger were to sail through, the firm will have more assets under its name. The operating capital will also be substantial for the firm to take on massive projects. Therefore, investors should expect the stock to pick up in the future.