Why Cloudera Stock Fell 33.1% in 2018

2018 was a year of big stock swings and big merger news for the cloud company.

Keith Noonan
Keith Noonan
Jan 14, 2019 at 3:16PM
Technology and Telecom

Check out the latest Cloudera earnings call transcript.

What happened

Shares of Cloudera (NYSE:CLDR) sank 33.1% in 2018 according to data from S&P Global Market Intelligence. Headwinds stemming from a change in the business' sales strategy and personnel, valuation pressures from the company's merger with Hortonworks, and broader market sell-offs all contributed to the cloud company's big stock decline. 

^SPX Chart

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The biggest business-related factor in Cloudera's stock performance last year was its slowing sales growth. The stock saw its most dramatic sell-off of the year in April, when the company gave sales growth targets that were a rude awakening for investors. After recording roughly 50% growth for subscription revenues in its 2018 fiscal year, the company informed shareholders that subscription growth for the current year would come in closer to 24% -- and news of slowing momentum caused the stock to sell off.

A cloud icon.

Image source: Getty Images.

So what

Cloudera has since revised its annual growth target to 27%. That's not terrible, particularly because the company's losses have been narrowing. But it's still a far cry from the growth that the company had been posting, and raises concerns about demand for the business' services. 

Besides the volatility that hit the broader market (and growth-dependent tech stocks in particular) at the end of the year, Cloudera's merger with Hortonworks was the other big factor in the company's stock performance last year. Cloudera detailed its since-completed merger with Hortonworks in October, and not surprisingly, the two stocks traded in tandem with the other's news and earnings performance. Both stocks rose in early trading following the deal, but shares fell after Hortonworks guidance came in below the market's expectations and continued to sink as the broader market sold off. However, Cloudera did manage to close out 2018 on a positive note with third-quarter earnings results that came in ahead of the market's expectations. 

Now what

The company published a press release on Jan. 3, saying that it had completed its merger with Hortonworks and that the two businesses would move forward under the Cloudera banner. Despite some recent roadblocks to sales growth, Cloudera's business does seem to be moving toward profitability, and the merger with Hortonworks could allow it to leverage and maintain its position in open-source enterprise cloud services. However, there's not a lot of visibility as to how demand for its Hadoop-based offerings will develop, and the stock remains priced for growth trading at roughly four times expected sales.