Guggenheim cuts Teradata price target to $37, maintains Buy rating

On Wednesday, Guggenheim Securities adjusted its stance on Teradata Corporation (NYSE:TDC), a cloud-based data analytics company, by reducing its price target to $37 from $42, while still holding a Buy rating on the stock. According to InvestingPro analysis, Teradata appears undervalued at its current price of $30.89, with a Fair Value suggesting meaningful upside potential. The move comes as the company faces challenges in meeting its financial targets and undergoes a change in its management team.

Guggenheim’s analyst cited repeated instances where Teradata has missed its financial targets and lowered its guidance, leading to a loss of investor confidence. Despite these setbacks, the firm believes Teradata still possesses strategic value, particularly in its recurring revenue stream. With a solid gross profit margin of 61% and EBITDA of $315 million in the last twelve months, the company maintains strong operational efficiency. Teradata’s Cloud Annual Recurring Revenue (ARR) target of over $1 billion for 2025 has been revised down to approximately $700 million, and the company now anticipates a year-over-year revenue decline of 4-6% for the same year.

The analyst pointed out that Teradata’s total ARR, excluding perpetual license and consulting revenue, has only seen an aggregate growth of 3% from 2019 through 2024. This is in stark contrast to the initial expectations of a mid-single digit total revenue Compound Annual Growth Rate (CAGR). While Teradata’s Free Cash Flow (FCF) guidance has been disappointing, InvestingPro data shows the company maintains a strong FCF yield of 10% and generated $298 million in levered free cash flow over the last twelve months, demonstrating resilient cash generation capabilities despite challenges.

Despite the downward revision in financial projections and the departure of CFO Claire Bramley, who is leaving to pursue another opportunity, Guggenheim has chosen not to alter its stock rating. The analyst emphasized that there is no evidence of Teradata’s customers defecting en masse to competitors. Many existing on-premise customers are staying with and even expanding their use of Teradata’s services.

Guggenheim’s revised price target of $37 implies a multiple of 2.8x Enterprise Value/Next Twelve Months Recurring Revenue, which is still below what the firm considers the intrinsic value of Teradata’s recurring revenue stream. The analyst concluded by suggesting that if the public markets fail to recognize Teradata’s value, other entities might.

In other recent news, Teradata Corporation faced a significant setback as its fourth-quarter revenue and 2025 guidance failed to meet analyst expectations, causing a 15.3% drop in shares. The data analytics company reported Q4 revenue of $409 million, an 11% decline year-over-year and below the predicted $414.95 million. The adjusted earnings per share, however, surpassed expectations at $0.53, compared to the anticipated $0.44.

The company’s outlook for 2025 has raised concerns among investors. Teradata projects an EPS of $0.55-$0.59 for Q1 2025, falling short of the $0.64 analyst consensus. The full-year 2025 EPS guidance of $2.15-$2.25 also missed the Street’s $2.46 projection.

Despite these challenges, Teradata reported a 15% YoY increase in public cloud annual recurring revenue (ARR) to $609 million in Q4. However, the total ARR saw a 6% decrease to $1.47 billion.

Adding to the recent developments, Teradata announced the departure of CFO Claire Bramley effective March 31. Bramley will be assuming a CFO position at another company outside of Teradata’s industry.

These recent developments reflect investor concerns about Teradata’s growth trajectory and its ability to meet future expectations.

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