Why Did Teradata’s Stock Rise by 13%?



Fiscal 1Q16 results and Victor Lund’s appointment as CEO boosted Teradata’s stock

Previously in the series, we discussed Teradata’s (TDC) recently announced fiscal 1Q16 results and management change. Teradata’s data analysis peer Tableau Software (DATA) also released its fiscal earnings on May 5, 2016.

Teradata’s fiscal 1Q16 earnings, which exceeded analysts’ expectations, coupled with Victor Lund taking over as CEO improved the market sentiment for Teradata stock. As a result, after fiscal 1Q16 results, Teradata stock rose ~13%. This increase in prices was a relief to the company’s investors, as in the last one year, Teradata’s stock has declined by approximately 38%, and that includes the recent stock rise.

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Teradata’s sale of TMA business is likely to boost its margins

Teradata’s sale of its marketing applications business is expected to complete by fiscal 2Q16. Teradata’s marketing applications segment had lower service margins, which impacted the company’s overall margins. This prompted the company’s management to consider its sale and “allow the company to focus exclusively on improving and growing its Data and Analytics business.” In late 2015, Forrester Wave named Teradata as a market leader in the analytics space, above technology heavyweights like Oracle (ORCL), Microsoft (MSFT), and International Business Machines (IBM).

Fiscal 2016 expectations

For fiscal 2016, Teradata expects revenue and EPS in the $2.25 billion-$2.32 billion range and the $2.35-$2.50 range, respectively. Analysts expected the company to provide EPS guidance of $2.35.

Investors who wish to gain exposure to Teradata could consider investing in the SPDR S&P 500 ETF (SPY). While SPY invests ~0.02% of its holdings in Teradata, it also has an exposure of ~8% to application software.


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