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Why Teradata Stock Is Soaring on Friday

By Anders Bylund - Aug 7, 2020 at 2:19PM

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The data storage expert posted second-quarter results far ahead of analyst expectations.

What happened

Shares of Teradata (TDC -8.06%) surged on Friday, following a strong second-quarter earnings report. The stock was up 19.7% at 1:23 p.m. EDT, having retreated from a peak gain of 21.6%.

So what

The data storage and analytics specialist saw second-quarter sales fall 6% year over year to $457 million. Adjusted earnings decreased by 17% to $0.24 per diluted share. Your average Wall Street analyst was calling for earnings near $0.22 per share on revenue in the neighborhood of $437 million.

A bar chart showing a small rebound from a large drop.

It's a good start but far from a full recovery. Image source: Getty Images.

Now what

Teradata's financial results are clouded by the company's ongoing move from single-purchase sales to a subscription-based revenue model. The company is also under new management, having appointed CEO Steve McMillan to the top job two months ago. And the changes don't stop there. Teradata is also moving away from traditional storage boxes in the data center toward a broader data management platform that includes hybrid storage options across the leading cloud computing platforms.

"We will win in the cloud, and we'll continue to offer choice and cloud deployment options to meet our customers' needs," McMillan said in Teradata's second-quarter earnings call. "That part of the strategy will not change, and I will make sure we are focused on accelerating our move to the cloud."

That being said, McMillan has plenty of work to do. Teradata is still trading more than 30% below its 52-week highs. This could be a strong turnaround story in the long run if McMillan plays Teradata's hands right in the transformation to cloud-based operations and subscription-style contracts.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Teradata. The Motley Fool has a disclosure policy.

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$35.71 (-8.06%) $-3.13

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