Teradata (TDC) Misses Q4 Revenue Estimates, Stock Drops 12.5%: Time for Long-Term Investors to Consider Entry Points

Teradata (NYSE:TDC), a leading provider of data analytics and cloud services, recently reported its Q4 and full-year 2024 financial results, missing revenue estimates and causing its stock to drop by 12.5%. This earnings miss has raised concerns among investors, but long-term investors should consider this dip as an opportunity to enter the market at a potentially undervalued price. In this article, we will analyze Teradata's recent performance, discuss potential entry points for long-term investors, and highlight key metrics to monitor as the company works towards recovery.



Teradata's Recent Performance and Earnings Miss

Teradata's Q4 revenue of $417.1 million fell short of analysts' estimates of $442.5 million, leading to a 5.7% year-over-year (YoY) decline. The company's full-year revenue also missed estimates, coming in at $1.750 billion compared to the expected $1.830 billion. Despite these misses, Teradata's non-GAAP diluted EPS increased 17% to $2.42, driven by improved operating margins and cost-cutting measures.



Potential Entry Points for Long-Term Investors

1. Price-to-Earnings (P/E) Ratio: Before the earnings miss, Teradata's P/E ratio was around 13.10. After the drop, the P/E ratio has likely decreased, making the stock more attractive for long-term investors. A lower P/E ratio indicates that the stock is relatively undervalued compared to its earnings.
2. Price-to-Sales (P/S) Ratio: Teradata's P/S ratio was around 1.75 before the earnings miss. After the drop, the P/S ratio has also likely decreased, further indicating that the stock is undervalued. A lower P/S ratio suggests that the company's sales growth is not reflected in its stock price.
3. Free Cash Flow (FCF) Yield: Teradata's FCF yield was around 3.5% before the earnings miss. After the drop, the FCF yield has likely increased, making the stock more attractive for long-term investors. A higher FCF yield indicates that the company is generating more cash relative to its stock price.
4. Dividend Yield: Teradata has a dividend yield of around 1.5%. While the dividend yield may not have changed significantly after the earnings miss, long-term investors should monitor any changes in the dividend payout to assess the company's financial health and commitment to shareholders.

Key Metrics to Monitor Teradata's Recovery

To assess the company's recovery, long-term investors should monitor the following key metrics:

1. Revenue Growth: Keep an eye on Teradata's quarterly and annual revenue growth to ensure that the company is regaining momentum in its core business.
2. Cloud ARR Growth: As Teradata is pivoting towards cloud services, monitor the growth in public cloud ARR to assess the success of its transformation efforts.
3. Operating Margin: Track Teradata's operating margin to ensure that the company is maintaining or improving its profitability as it transitions to cloud services.
4. Free Cash Flow (FCF) Growth: Monitor Teradata's FCF growth to assess the company's ability to generate cash from its operations and maintain its dividend payout.

By closely monitoring these key metrics and considering the potential entry points discussed above, long-term investors can make informed decisions about investing in Teradata following its earnings miss. While the recent performance may be concerning, the company's long-term prospects and strategic initiatives, such as its cloud transformation and AI technology investments, should not be overlooked.