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Why Teradata Stock Crashed Today

By Anders Bylund - May 7, 2021 at 12:32PM

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A strong beat-and-raise earnings report triggered a baffling sell-off today as some investors are converting their paper profits into cash returns.

What happened

Data management specialist Teradata (TDC -1.42%) reported first-quarter results after the closing bell on Thursday. The company exceeded Wall Street's estimates across the board, but market makers are focusing on management's modest full-year guidance. So Teradata shares fell as much as 14.8% on Friday morning.

So what

First-quarter sales rose 13% year over year to $491 million. Earnings more than doubled from $0.27 to $0.69 per diluted share. The Street's consensus estimates called for earnings near $0.47 per share on revenue in the neighborhood of $468 million. Annual recurring revenue (ARR) in Teradata's public cloud division rose 176% to $1.4 billion, beating the company's guidance of at least 165% growth.

Looking ahead, Teradata raised the midpoint of its full-year adjusted earnings guidance from $1.54 to $1.64 per share. That's still below the current analyst view, which points to $1.71 per share.

"As enterprises continue the digital transformation, the opportunity in cloud is significant, and we are moving with speed and purpose to accelerate our positioning," CEO Steve McMillan said in the earnings call. "Our Q1 results demonstrate that our strategy is the right one, and it is resonating with current and prospective customers. With 176% year-over-year growth and public cloud ARR during the first quarter, customer engagement and acceptance continues to grow."

A businessman puts a thick stack of hundred-dollar bills in his jacket's inside pocket.

Image source: Getty Images.

Now what

The negative reaction to Teradata's beat-and-raise report may look silly at first glance, but the stock was priced for perfection. Investors have pocketed a 153% return over the last six months alone, and that figure includes Friday's big drop.

Don't cry for Teradata's investors, in other words. Many of them are simply cashing in some of their paper profits today.

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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