July 17, 2013
Informatica (INFA) Rebounds 63% From October Low
Read the July 2013 issue of Tech-Stock Prospector on your Amazon Kindle or
Kindle for iPad/iPhone reading app.
Here are some of the topics covered in the July 2013 issue:
*Mid-year update on the 8 TSP Tech Disruptors
*Splunk makes sense out of machine data
*A promising new growth vertical for NetSuite
*The deal pipeline builds at Guidewire Software
*ServiceNow pulling various growth levers
*Why Imperva continues to raise revenue guidance
*The key players to know in business analytics
*The bullish case for Cisco Systems
*Akamai Technologies accelerates mobile networks
*Can Aruba Networks hold its own against Cisco?
*How Ruckus Wireless benefits from Wi-Fi offloading
*A networking company to watch: SolarWinds
*Why some savvy investors were Demandware buyers
*Qualys gains market share in cloud-based IT security
*Riverbed Technology finds a new growth niche
*Palo Alto Networks is scorching firewall competitors
*Deal Report: IPO success for Gigamon
Order the July 2013 issue of TSP here:
Stifel today raises its Informatica (INFA, $39.01) price target to $43 from $41
ahead of Q2 results out next week. The firm remains a big believer in the
Informatica comeback story based on improved sales execution, the company’s
ability to adapt to changes in the Big Data market and momentum in the big-
ticket master data management (MDM) business.
Stifel points out that Informatica is entering the heart of the easiest year-over-
year compares the company has faced in years.
Last July (TSP #125), we said Informatica shares would be most attractive on
a pullback into the mid-$20s. The stock in October dipped to a low of $23.83
and is now up 63% from this level.
The following piece appeared in the June 2013 issue of Tech-Stock Prospector
Shareholders of Informatica (INFA), a provider of data-integration software, over
the past 12 months were taken on a volatile ride, with the stock falling from above
$54 in April 2012 to a low of $23.83 in early October. The problem: a couple of
quarterly misses caused by sales force execution issues and deal delays.
I was surprised by the stumbles because CEO Sohaib Abbasi has always run a tight
ship and Informatica is considered one of the best ways to play the Big Data trend.
After the shares in early July 2012 fell 28% in one session to around $31, I wrote in
the July 2012 issue (TSP #125) that Informatica would be most attractive on a
pullback into the mid $20s. I figured Abbasi would eventually get the correct sales
leadership in place to put Informatica back on track.
On October 5, the day after the company warned its Q3 numbers would miss
estimates and the stock hit its 52-week low, Nomura Securities made a prescient
call, upgrading Informatica to ‘Buy’ with a price target of $33 when the shares were
trading around $26. The firm at the time liked the risk/reward profile even though it
said it would likely take several quarters until there was a meaningful recovery in
Some big institutional investors agreed that the worst looked over, and in Q4
stepped in to do some buying. Janus Capital increased its position by 236%,
purchasing 6 million shares, and in Q1 added 374,927 to bring its total holdings up
to 8.94 million shares. Cadian Capital Management in Q4 opened a position of 1.9
million shares and in Q1 added 895,000 shares, while Alkeon Capital in the
December quarter started a position of 1.14 million shares and in Q1 boosted its
stake by 61% with the addition of 701,574 shares.
Not all of Wall Street has committed to the bullish story. There have been some big
sellers as well, notably T. Rowe Price, which in Q4 unloaded 11.5 million shares and
in Q1 sold off 783,000 to bring its position down to 1.92 million shares. Fidelity in
Q4 sold 1.62 million shares and in Q1 jettisoned 1.92 million shares, leaving it with
just 423,922 shares.
The truth is Informatica, despite the stock rallying back above $37 in late May, still
has recovery work to do, as license revenue declined in both Q4 and Q1. New sales
leadership is now in place in both North America and the EMEA region. On the Q4
earnings call, Abbasi said the overall business was stabilizing and that large deals
were coming back, definitely encouraging signs.
I like the metric that 56% of Informatica customers have yet to adopt even one of its
newer products because it shows the lucrative cross-selling opportunities that exist
for the company. In December, Informatica introduced PowerCenter Big Data
Edition (BDE)—a highly scalable, high-performance enterprise solution that works
with both Hadoop clusters and traditional data management infrastructure. With
BDE, IT organizations can easily and efficiently integrate and analyze new types and
sources of data, tripling their productivity by moving away from hand coding to a
no-code visual development environment.
In Q1, total revenue rose 9%, with software revenue up 2% and services revenue
advancing 15%. Given that software subscription revenue is approaching $10
million a quarter and growing quickly (+69% year over year), the company began
reporting it separately from license revenue, which declined 2%. Informatica in the
March quarter booked license orders from 61 new customers (up from 47 a year
ago) and new customers accounted for 27% of license order value, vs. 14% in Q4.
While the number of Q1 deals over $300,000 stayed flat year over year, the
company closed 19 deals worth more than $1 million, up from 11 in the year-ago
quarter. Of the 19 largest deals, more than 40% included Informatica’s master data
management (MDM) platform, which is used by enterprises to consolidate data from
various sources—including different departments, customers, channel partners and
On the Q1 call, Informatica raised 2013 revenue guidance to a range of $885 million
to $925 million from $850 million to $900 million previously. The 2013 consensus
estimate of $913.4 million (indicating growth of 12.6%) is above the guidance
midpoint of $905 million.
Read the latest issue of Tech-Stock Prospector on your Amazon Kindle or Kindle for
iPad/iPhone reading app.
Here’s the Kindle link: http://www.amzn.com/B004T6Z0ME
Tech-Stock Prospector Managing Editor Rob DeFrancesco has more than 20
years of experience covering the tech sector. He is a former senior writer with
Louis Rukeyser’s Wall Street.
TechStockProspector.com, launched in 2003, is an investment-research service
focused primarily on the networking, storage, security, wireless and software
sectors. Annual subscription: $350.
For more information or to place an order, call 800-392-0998.