Teradata (TDC +0.19%) stock is crashing in Tuesday's daily trading. The database company's share price was down 23.4% as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
Teradata published its fourth-quarter results and held a conference call for investors after the market closed yesterday. While the company's Q4 sales and earnings performance actually came in significantly better than the market had expected, its forward guidance disappointed Wall Street. Following the report, the company's stock has also received a ratings downgrade from Bank of America.
There was actually a lot to like in Terada's Q4 report
For the fourth quarter, Teradata posted non-GAAP (adjusted) earnings per share of $0.56 -- beating the average analyst estimate's call for per-share earnings of $0.51. Revenue for the period rose 1.1% year over year to come in at $457 million, which was ahead of the average analyst estimate's call for sales of roughly $455.7 million.
Annual recurring revenue from the company's public cloud business rose 48% year over year to reach $528 million. The company's cloud business posted a net revenue retention rate of 124% -- which means that existing customers increased their spending 24% on average.
All in all, it was actually a pretty solid quarter for the business and indicated that the company's pivot to the cloud was proceeding at a healthy pace. But the company's forward guidance recontextualized things and was quickly followed by a downbeat write-up from a Bank of America analyst.
NYSE: TDC
Key Data Points
Teradata's 2024 forecast has investors feeling bearish
While the company's cloud business appears to be making progress, management indicated that it was seeing significant declines for its on-premise solutions. Reading between the lines, it looks like the company may not be converting some customers to its cloud offerings as they are leaving behind its on-premise solutions.
This year, Teradata expects sales to come between flat and up 2% annually on a constant-currency basis. Meanwhile, the company expects annual recurring revenue (ARR) for its public cloud business to grow between 35% and 41% on a currency-adjusted basis.
Meanwhile, adjusted earnings per share are projected to be between $2.15 per share and $2.31 per share. This target range came in significantly below Wall Street's call for per-share earnings of $2.37 prior to the release.
Following the underwhelming forward guidance, analysts at Bank of America cut their rating on the stock from buy to neutral. The analysts cited a tougher path to hitting the company's goal of over $1 billion in public cloud ARR by the end of 2025 and weak free-cash-flow growth as reasons for the downgrade. On the other hand, Teradata's management said in its conference call that it had already factored a slowdown in 2024 into its forecast and that the team remained confident in hitting the target.
