Tableau Software (DATA)
By Michael Cintolo, Chief Analyst, Cabot Market Letter and Cabot Top Ten Trader
From Cabot Wealth Advisory 12/4/14 Sign up for Cabot Wealth Advisory—it’s free!
In terms of new buying in the current environment, stock selection and timing your purchase are paramount. One name I’m watching closely is Tableau Software (DATA), a rapidly growing company that’s cracked the code on making business intelligence software useful for the masses, not just the top brass. Here’s what I wrote about the company in the December 1 issue of Cabot Top Ten Trader:
“Tableau Software is at the intersection of Big Data and Business Intelligence—the firm has made waves by developing software that easily and graphically depicts a firm’s data so that most employees (not just the few at the top) can get the most out of it. (It was spun out of Stanford a decade ago with VizQL, a technology that allows users to produce sophisticated graphs with just drag and drop functions.) Despite its average initial sale being in the $10,000 range (Tableau is trying to democratize data analytics), the company has been growing like mad; it serves 70% of the Fortune 500 and is even used to better understand the reams of data produced by other high-quality products like Splunk. While sales growth has been slowing some, it’s projected to grow in the 40% to 50% range for many quarters to come thanks to larger deals (more than 200 deals of more than $100,000 in the latest quarter alone); earnings should remain positive but fail to grow much because of heavy investments going forward (employee headcount in the third quarter was up 65% from the year before!). The main worries here are competition—IBM and Salesforce are jumping into the graphics analysis field—and the investment spree will keep the valuation at nosebleed levels. But Tableau looks to have a special product and rarely found growth that should keep big investors interested.”
“As for the stock, it’s in the midst of a huge, deep base that began when glamour stocks imploded in March—DATA fell from a peak of 102 down to 52 in May. Since then, it’s been slowly working its way back; usually when you have a base that deep (49% in this case), the stock (a) needs many months to repair the damage, and (b) will build a shallower, tighter base near its old highs—a “base-within-a-base” is the parlance.”
That’s what DATA looks to be doing now—it’s four weeks into an 11% consolidation. It could go on for a bit longer, but I think nibbling around here (maybe a half-sized position) could work with a stop in the mid-70s. Then look for the stock to stage a powerful breakout above 87 or so in the weeks ahead; assuming the market is still positive, that would be the signal to add some more shares as DATA would likely be starting its first sustained upmove since February.
To receive further updates on DATA and additional momentum stocks, click here.
Tableau Software (DATA) came public last June, and in the months that followed, three things happened.
First, my daughter Chloe mentioned that she has a friend who uses the software regularly and loves it. Second, the stock earned a mention in Cabot Market Letter as a recent IPO worth watching. And third, we started using the software at Cabot, to better see and understand the patterns of our own business.
Note this is not about Big Data; this is more about medium data. It’s about replacing the expensive analytics software from firms like Oracle and SAP with a product that’s easier to use and is accessible on a desktop, on a network or in the Cloud. Revenue growth is accelerating (up 90% last quarter), while the number of customer accounts is soaring, up 1,500 in the third quarter alone.
Technically, DATA has a great pattern. After peaking at 78 in September, it traced out a long shallow bowl, eventually climbing out to new highs in January. The broad market’s pressure pushed it down as the correction began, but DATA bounced back very rapidly and a couple of days later the stock was hitting new highs. It wasn’t a massive high-volume breakout like Facebook’s but it has potential. In fact, the catalyst might be the release of fourth-quarter results after the market close tomorrow (February 4)!
Note: No Cabot advisory has recommended DATA yet, but Mike Cintolo of Cabot Market Letter is following it closely. To get regular updates on all of Mike’s recommendations, click here.
|Tableau Software (DATA)
837 North 34th Street, Suite 200
Seattle, Washington 98103
|Index Membership: N/A
Industry: Application Software
Full Time Employees: 1,039
2/3/14 Tableau Software (DATA): Disruptive Stock Number Six