What Happened:
Shares of data and analytics software provider Teradata (NYSE:TDC) fell 14.1% in the pre-market session after the company reported first quarter results with billings unfortunately missing analysts' expectations. Its ARR (annual recurring revenue) also missed Wall Street's estimates. The company did try to assuage the market by maintaining full year guidance for ARR and revenue growth as well as EPS. Overall, this was a mediocre quarter for Teradata due to the underperformance of key topline metrics.
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What is the market telling us:
Teradata's shares are not very volatile than the market average and over the last year have had only 4 moves greater than 5%. Moves this big are very rare for Teradata and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 3 months ago, when the stock dropped 24.1% on the news that the company reported fourth-quarter results, which missed Wall Street's expectations for ARR (annual recurring revenue), though revenue beat. In addition, profit and EPS both came in better. Guidance was a key driver of the stock weakness. ARR, revenue, and non-GAAP EPS guidance for 2024 were all below expectations. To provide some insights into the weak outlook, management noted that the 2023 outlook for cloud and total ARR fell below the company's expectations. This was mostly attributed to deal timing issues. The company added, "There was a handful of large deals that slipped out of December, and each was worth $2 million or more of cloud ARR growth."
Moving ahead, as the company shifts to a pure cloud subscription model, it expects on-prem erosions to have a 4% to 5% negative impact on total ARR in Q1 2024. However, the company expects "sequential dollar growth throughout the year with the second half of 2024 being much larger than the first half." Overall, this was a weaker quarter for the company.
Teradata is down 24.6% since the beginning of the year, and at $32.99 per share it is trading 42.5% below its 52-week high of $57.41 from July 2023. Investors who bought $1,000 worth of Teradata's shares 5 years ago would now be looking at an investment worth $870.86.
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