Tableau Gives Up Gains: Estimates Rise, Targets Decline, on Upbeat Q1, Forecast
By Tiernan Ray / Barrons / May 6, 2014
Shares of enterprise data visualization software maker Tableau Software (DATA) are down 47 cents, or 0.9%, at $57.52, surrounding gains of as much as 5% this morning, after the company yesterday afternoon beat Q1 expectations and forecast this quarter’s revenue above consensus, and also raised its year revenue outlook above expectations.
With universal praise for the report from both bull and bear, estimates are rising all around. However, price targets are also going down at several shops, even among the bulls, the reason being what many cite as the lower valuation multiples investors will pay these days for growth.
Brent Thill, UBS: Reiterates a Buy rating, but cuts his price target to $80 from $100. “The biggest pushback we get from investors is not fundamental, but purely multiple driven, as shares have come off 37% from its peak 2.5 months ago. But given the magnitude of Q1's $11.5M revenue beat and $22.5M CY14 top line raise, improving metrics and long runway ahead, we still believe DATA is positioned to be a multi-year winner in the Big Data space [...] New $80PT (old $100) is based on 10.5x EV/S in 5-8 Qs (old 15.4x). Our lower price target solely reflects multiple compression in the overall software group. DATA’s fundamentals are still positive, in our view.” Thill raised his 2014 estimates to $350 million and a 19-cent loss from $325 million and a 33-cent loss.
Brian White, Cantor Fitzgerald: Reiterates a Buy rating, and a $122 price target. “Last night, Tableau delivered a strong 1Q:14 print, offered up a healthy 2Q:14 outlook, and increased its 2014 guidance, lending credence to the notion that the recent sell-off in the stock was driven by a shift in market sentiment, rather than a change in fundamentals. In light of last night’s big upside and sharp 43% drop in the stock price from the peak in late February, we reiterate our BUY rating and believe investors have been given another opportunity to get involved in this high-quality, Big Data play. Given Tableau’s strong 1Q:14 report and increased 2014 outlook, we are raising our 2014 and 2015 revenue projections [...] During 2Q:14, Tableau is on track to release Tableau 8.2, which will support Mac products, and “story telling” is expected to be one of the more popular new features. Furthermore, Tableau 9.0 could launch during the first half of 2015; however, there is no definitive date around the exact time of the launch just yet.” White raised his 2014 estimates to $346.5 million and a 12-cent loss from a prior $322.1 million and a 19-cent loss.
Derrick Wood, Susquehanna Financial Group: Reiterates a Neutral rating, and cuts his price target to $74 from $89. “Overall, we think fundamentals remain well intact as DATA continues to drive greater awareness and adoption of Data Visualization applications. However, as DATA anniversaries the impact of closing on pent-up demand that was captured following substantial sales capacity expansion starting in 2H12, we see comps starting to get much tougher in 2H. Furthermore, management continues to guide for meaningful deceleration, with our above-guidance forecasts still calling for license growth to drop to less than 30% by 4Q14. Lastly, while momentum is strong today, we feel that being a single product company in the Analytical applications market with many competitors limits visibility in long-term revenue and growth potential. While we believe shares can rebound in the near- term, given these dynamics and with shares currently trading at over 8x EV/CY15 Sales, we maintain our Neutral rating. Our price target reduction reflects the significant contraction in valuations across high-growth software names, and our new $74 price target represents ~10x EV/CY15 Sales.” Wood raised his 2014 estimates to $360 million in revenue and a 1-penny-per-share net loss from a prior $328 million and a 9-cent loss.
Keith Weiss, Morgan Stanley: Reiterates an Equal Weight rating. “In its first quarters out of the gate as a public company, Tableau has beat the high-end of their revenue guidance range by 18.6%, 21.6% and in the most recent Q1 print by 18.3% – sustaining 80%+ YoY license revenue growth throughout. This string of strong quarterly performances has pushed up CY14 revenues expectations (assuming consensus again goes to the high-end guidance) by 35% since the IPO. As in the prior two prints, several growth drivers combined to drive the strong results; 1) new customer adds at >1,800 are up ~65% YoY, 2) 120 deals over $100K are up 56% YoY, 3) investments into international expansion yielded an acceleration to 130% YoY growth in Q1, and 4) continued expansion within existing customers has sustained 20%+ growth in cumulative product revenue per customer (by our estimate). Tableau continues to invest aggressively for growth, as total S&M headcount increased 68% YoY in Q1, with 58% growth in R&D – finding the right talent likely serves as the real limiter on these figures though. Given the large opportunity, current investment profile and strong execution, we see plenty of runway for continued top-line outperformance from DATA – supporting our $85 base case.” Weiss raised his 2014 view to $355.2 million in revenue and a 13-cent loss from a prior $324 million and a 28-cent loss.
The Big Beats Go On — Q1 Highlights Unique Analytics Growth
Morgan Stanley May 6, 2014
In a quarter where several competitors struggled with growth, Tableau grew license revenues 83% YoY, topping consensus by 23%. Uniquely addressing the democratization of analytics, we see plenty of runway for Tableau to gain market share.
DATA shares down 18% YTD versus CY14 revenue estimates already revised up 14% continue to shift the risk/reward dynamic favorably for the shares.
More of the Same, But the Same is Mighty Impressive.
In its first quarters out of the gate as a public company, Tableau has beat the high-end of their revenue guidance range by 18.6%, 21.6% and in the most recent Q1 print by 18.3% – sustaining 80%+ YoY license revenue growth throughout. This string of strong quarterly performances has pushed up CY14 revenues expectations (assuming consensus again goes to the high-end guidance) by 35% since the IPO. As in the prior two prints, several growth drivers combined to drive the strong results; 1) new customer adds at >1,800 are up ~65% YoY, 2) 120 deals over $100K are up 56% YoY, 3) investments into international expansion yielded an acceleration to 130% YoY growth in Q1, and 4) continued expansion within existing customers has sustained 20%+ growth in cumulative product revenue per customer (by our estimate). Tableau continues to invest aggressively for growth, as total S&M headcount increased 68% YoY in Q1, with 58% growth in R&D – finding the right talent likely serves as the real limiter on these figures though.
Given the large opportunity, current investment profile and strong execution, we see plenty of runway for continued top-line outperformance from DATA – supporting our $85 base case.
Q1 Sustains Strong Growth Trends. With Q1 license revenues 23% ahead of consensus and growing 83% YoY, Tableau started FY14 in much the same fashion as they ended FY13. While total revenues beat by 18.3%, deferred revenues were shy of consensus (one of the few strings that could be pulled in a solid Q1) putting billings 13% ahead of expectations and up 73% YoY. By our estimate, DATA saw another high-single digit YoY improvement in sales
productivity — if that trend holds, the outlook for the remainder of FY14 (which implies double-digit declines in productivity) should prove quite conservative. While Tableau spent in-line with our original expense forecast, top-line outperformance again pushed operating margins well ahead of consensus (+8.1% vs. consensus of -10.7%)
and EPS to ($0.01) vs. consensus of ($0.11).
Numbers Moving Up Again, but Outlook Remains Conservative .
After beating the mid-point of their Q1 revenue guide by $13M, management raised the full year guidance from $320-325M to $340-350M, or 48% YoY growth at the mid-point. While the company expects to continue investing aggressively for growth, the expected operating loss drops from ($20M)-($15M) to ($10M)-$0M. For Q2, Tableau targets revenues of $75-80M – up 4% QoQ versus a 3-year average seasonality of +24% – and an operating loss of
($6M)-($1M). For 2014, the implied deceleration in license growth also suggests an ~10% decline sales productivity in our model, an assumption that likely proves conservative given recent results. Our FY14 forecasts again move higher, reflecting the strong momentum at Tableau – license / total revenue / EPS move from $208M/$324M/($0.28) to $230M/$355M/($0.13).
Bull: $113
Discount of 45x Bull Case 2019e FCF of $289M
Rapid market expansion of customer base + sustained penetration of existing customers drives superior growth.
Broad market adoption results in DATA’s customer base growing at a 31% CAGR from CY13 to CY19e to reach 85K. Cumulative license per customer grows in the low teens and total revenue reaches $1,500M by CY19. Op. margins improve despite strength in new license growth, reaching 22% by CY19 with FCF as a % of rev. of 19%, in-line with peer averages. A robust growth rate and further margin expansion potential sustain DATA’s multiple at 45x EV/FCF in CY19e, yielding an $113 share price in CY15, assuming an 11.5% discount rate
Base: $85
Discount of 40x Base Case 2019e FCF of $241M
Strong new customer wins & solid expansion in existing accounts. DATA’s customer base grows at a 28% CAGR to reach ~75k in CY19. DATA continues to increase penetration within its base as cumulative license per customer grows low teens, and total revenue reaches ~$1,250M by CY19. Op. margins improve to 24% by CY19.
Our Base Case assumes FCF as a % of rev. at 19%, in-line with the avg. of its peer software companies. A strong FCF growth rate and margin expansion potential sustain DATA’s multiple at 40x EV/FCF in CY19e, yielding a $85 share price in CY15, assuming an 11.5% discount rate.
Bear: $27
Discount of 25x Bear Case 2019e FCF of $97M
Stronger competition and slower customer adoption. Customer growth decelerates to 14% through CY19 to reach ~62k customers. Penetration into the existing customer base slows and total rev. reaches $672M by CY19. By CY19, operating margins increase to 19%, and FCF reaches 15% of rev. DATA trades at 25x EV/FCF in CY19e, yielding a $27 share price in CY15, assuming an 11.5% discount rate.
Investment Thesis
- Tableau offers software that enables users to reduce the complexity and inflexibility associated with traditional business intelligence tools, allowing a broader population of users to derive insights from data. By expanding the overall market, DATA should sustain 30%+ growth for the next several years, in our view.
- We see a long-term path to 20%+ margins, but near-term we expect DATA to trade margin expansion for growth as it invests in the business.
- DATA’s 9x EV/CY15e sales multiple reflects pullback over the past month, and we see fundamental upside for DATA given strong market momentum and solid execution over the next several years. If DATA continues to push outside traditional BI users and sustains sales productivity as capacity ramps, the Bull Case revenue CAGR of >50% thru CY15 is achievable and could drive shares towards our $113 Bull Case.
Key Value Drivers
- New customer expansion, particularly to larger enterprise accounts where initial order sizes are larger
- Increased penetration among existing customers via viral adoption of the user base and new use cases
- International expansion
Risks to Achieving Price Target
- Increased competition from better-capitalized BI companies
- Lack of progress toward reaching profitability by 2015 could lead to weaker stock price performance
- Limited product portfolio could expose DATA to increased revenue volatility |
