Uncommon Idea: Data Agility for Cloud Conversion Talend TLND

Buy Talend (TLND) stock for the long term turnaround potential with the possibility of a shorter-term takeover. (Published Sept. 10, 2017)

– Build a long position on a breakout over $40 or a retest of $36. Add aggressively in the $32 to $34 range.

The Industry Opportunity

Research by Gartner indicates many enterprise IT departments, large and small, are embarking on cloud implementation strategies. But the results of these efforts are not necessarily increasing competitiveness, at least in terms of publicly available cloud services. Many organizations are dramatically underestimating the scope and pace at which their technology stacks are changing in the multi-cloud era and the impact it is having on both IT operations and overall ability to meet increasing business requirements.

Furthermore, according to IDC, more than 50% of IT organizations already utilize a multi-cloud approach and another 20% have plans to implement a multi-cloud strategy within 12 months. Combining diverse data remains a big challenge because of the potential disparities in coverage, quality, compatibility, confidentiality and update frequency, among others in data integration. The market opportunity is massive because of the tremendous benefits in gaining insights from sources like mobile apps, wearables and IoT systems.

What Talend Does?

Talend is a leader in cloud and big data integration software that helps companies make data a strategic asset that provides real-time, organization-wide insight into customers, partners and operations. Through its open, adaptive and unified integration platform, Talend provides the data agility required for companies to rapidly adopt the latest technology innovations and scale to meet the constantly-evolving demands of modern business.

The Uncommon Market Position That Sets Talend Apart

Talend’s Summer ‘17 provides the flexibility and portability to take development work designed for one cloud platform and reuse it with other cloud platforms. This is designed to help customers rapidly adopt new innovations in cloud services and future-proof current development work. Consequently, businesses can rapidly combine and analyze data in new ways to innovate faster, while reducing their maintenance and development costs.

Accelerate Migration to the Cloud: Talend Summer ’17 helps rapidly migrate on-premises data to the cloud, so customers can simply and intuitively build cloud data warehouses, power richer analytics and speed time-to-insight. With this release, Talend delivers the fastest bulk loader connector for Snowflake that accelerates data migration by up to 20x. Using data quality and visual extract, transform and load tools, Talend reduces the time needed to migrate on-premises and cloud data to Snowflake.

Delivering Data Quality with Machine Learning at Big-Data Scale: As data stores grow, customers must find new ways to clean and combine data at scale with even less human intervention. Talend Summer ’17 utilizes Apache Spark-powered machine-learning algorithms to automate and accelerate data matching and cleansing, improving scale, performance and accuracy. Over time, these algorithms monitor decisions made by data curators to become more intelligent and accurate. These new algorithms and machine-learning capabilities are designed to work seamlessly with Talend’s intuitive, role-base Data Stewardship app to enable continuous improvement within each data quality model.

Furthermore, Talend’s new set of connectors for Microsoft Azure SQL Data Warehouse, SQL Database, Azure CosmosDB, Data Lake Store, Queue Storage and Table Storage deliver business agility by enabling customers to rapidly integrate, analyze and stream big data in the cloud to fuel innovation and gain a competitive edge. In addition to Talend’s pre-existing connectivity to Microsoft Azure HDInsight and Blob Storage, these new connectors for Microsoft Azure allow customers to:

– Simplify cloud data pipeline creation for Azure developers

– Easily integrate streaming and historical data for contextual insight

– Quickly migrate on-premises data to the Azure cloud

– Scale data quality for big data using Spark-powered data matching and machine learning

– Improve DevOps productivity for managing security and configuration on big data clusters

“Teaming with Microsoft allows us to deliver a complete solution for scaling big data workloads in the cloud,” Talend CEO Ashley Stirrup said. “While other data integration solutions only connect with a few data sources, our Summer ‘17 release of Talend Data Fabric includes in-depth, native functionality to help customers quickly migrate a broad range of on-premise data sources to the Azure cloud and optimize cloud data pipelines, speeding time to insight.”

The result is the ability to move multi-terabyte, on-premise legacy data into Microsoft Azure and reduce the time to organize and analyze data for decision making from several hours down to 15 minutes or less.

Financials – Talend’s Fortunes are Looking Up

The second-quarter financial results for Talend delivered results worthy of optimism. The company delivered 41% year-over-year growth on revenue of $35.81 million. Additionally, subscription revenue grew an impressive 43% to $30.28 million in the quarter. The most encouraging data point from the quarter may be the huge improvement in the operating margin. Talend improved IFRS operating margins from -30% to -18% and non-IFRS operating margins from -27% to -13% from the year-ago period. While not yet profitable, this should be seen as a big step in the right direction.
Recent Business Highlights from the second quarter include:

– Became the first integration provider to support Cloudera Altus to simplify running large-scale data processing applications in the public cloud.

– Unveiled multi-cloud big data integration solution for major cloud platforms including Amazon (AMZN), Google (GOOGL), and Microsoft Azure.

– Announced a native high-performance Snowflake Connector to streamline cloud data migration

– Named award-winning software industry veteran Nora Denzel to Talend Board.

Management expects momentum to continue in the second half of 2017 as the company’s product advancements remain key and subscription revenue a driver of growth. Gross revenue for the third quarter is expected in the range of $37 million to $38 million as quarter-over-quarter and year-over-year growth remain strong. The company expects a slight improvement in its midpoint non-IFRS loss per share at $0.19. For the full-year, Talend anticipates income between $146.2 million to $148.2 million from $105.9 million a year ago with a midpoint non-IFRS loss per share of $0.815.

CRN, a brand of The Channel Company, named Talend to its 2017 Big Data 100 list. This annual list recognizes the ingenuity of tech suppliers that are raising the bar for data management by bringing to market innovative solutions for harnessing the increasing amounts of data generated in today’s digital world.

The Technical Analysis – On a Breakout Over $40 or Pullback to $36-$38, TLND is an optimal technical BUY. In the $32-$34 range it is an Aggressive BUY.

Talend, TLND, chart, technical analysis
Click for a larger chart.

Talend bulls have enjoyed a stellar year with the stock up some 77% since 2017 kicked off. Investors have to glance back to the beginning of March to find back-to-back weeks when the stock finished lower. Our focus is on the rising support levels as they meet the horizontal resistance area of $40. This is known as an ascending triangle.

Ascension more often favors the bulls while a descending triangle favors bears.

The support levels align almost precisely with the 13-week simple moving average (SMA). Should the 13-week SMA fail as support, we’d anticipate the 20-week SMA at $36 to act as the next area of buyers. While the 20-week SMA hasn’t been tested since the start of 2017, it acted as previous resistance then and once price pushed above, it never looked back.

This setup provides two entry options: buy the breakout or buy a successful test of support. A weekly close over $40 appears as the most likely trigger, although shares appear buyable here without the trigger. Price resistance is somewhat formidable as double-tops cannot be underestimated. You could argue this is one continuous top, but the flat Stochastics and falling Stochastics RSI indicate the resistance is strong. There is no technical resistance level above $40 until we reach $44, our initial upside target with a 12-to-18-month upside target of $52.

A secondary approach is to buy a successful test of $36 where the stock does not close under the $36 level in consecutive weeks. This becomes a range trade where you would expect the stock to move between $36 and $40 in a gentle rising fashion. A trader entering in this fashion must ironically consider a partial sale if shares hit $40 but fail to close above that level. At the very least, a trailing stop or partial profit trade should be considered.

Catalysts for the Thoughtful Investor on Why Talend is a Buy

Recently, Talend unveiled a new version of its Data Fabric platform that is optimized to manage cloud and multiple-cloud IT environments. The company has adapted to the fact that many businesses find it imperative to pursue service from many different cloud providers. As part of Talend Summer ’17, companies can seamlessly manage and integrate information across Cloudera Altus, Google Cloud,

Microsoft Azure, Amazon Web Service (AWS) and Snowflake, using drag-and-drop visual tools to build big data workflows that run any of the aforementioned platforms.

Additionally, Talend announced a geospatial connector for Data Fabric that makes it easier for
customers to integrate geographical or special information into their business decisions. The software has the ability to render maps, satellite images and apply analytical methods to terrestrial or geographic datasets to provide specialized components for geospatial operations such as calculating longitude and latitude coordinates, converting various location details into 2D or 3D point geometries and determining centroids for location triangulation. This information can be used for a variety of purposes including, safe traffic flow, first-responder services, precision farming and/or geo-marketing, whereby promotional offers can be delivered based on a consumer’s proximity to a particular brand. The combination of understanding both time and space along with accessing data from all walks of the cloud should help propel sales for the foreseeable future.

The Bottom Line

1. Talend is a leader in cloud and big data integration software that helps companies make data a strategic asset that provides real-time, organization-wide insight into customers, partners and operations.

2. Talend’s new-to-market platform offers enterprises the ability to move multi-terabyte, on-premise legacy data into Microsoft Azure and reduce the time to organize and analyze data for decision making from several hours down to 15 minutes or less. In business, time is money and Talend is delivering companies.

3. In the range of $36 to $38 we like TLND as a long-term buy and hold. Over $40, we like TLND as a momentum breakout long. The small-cap nature, short interest and new-issue status will make it volatile.

4. Talend’s Summer ’17 platform allows companies to seamlessly manage and integrate information across Cloudera Altus, Google Cloud, Microsoft Azure, Amazon Web Service (AWS) and Snowflake using drag-and-drop visual tools to build big data workflows that run any of the aforementioned platforms.