I have been a big fan of Tableau (DATA). Last May, I thought the decline in the stock was enough to get software investors back into the shares. Back then, the stock was $58. Since that article, the stock is up 67%.
Tableau reports after the close, and I thought I would update my investment thesis.
Back in February, Tableau reported a strong third quarter. Total revenue grew 75% to $142.9 million. The better-than-expected results came from strong license growth. The company signed 2,600 new customers in the quarter, which was up 95%. Tableau closed 304 deals over $100,000. That was up 104% sequentially.
For the year, Tableau had total revenue of $412.6 million, up 78%, and earned $38.5 million, or $0.52 a share. License revenue grew 75%.
The results show that corporations worldwide are discovering Tableau's analytical software, and strong penetration rates can continue for the next few years as the company adds salespeople.
For fiscal 2015, management guided to 36% license growth and total revenue growth of 40%, which seems very conservative.
Unlike a lot of cloud computing companies, Tableau Software is profitable. The company should be able to keep its gross margins in the 90% range and leverage operating margin as the salesforce becomes more productive. Tableau will probably end the year with an operating margin of just 3.7%, as it spends a ton of money building a salesforce. For example, the company just recently opened an office in Paris.
But with time, the sales leverage drops right down to the bottom line. So operating margin is expected to jump from 3.7% in FY 15 to 9% next year and to an estimated 12% by fiscal 2017. If that happens, earnings per share will grow 180% next year and over 80% the year after.
Assuming Tableau can continue to execute, the stock should continue to move higher, with the occasional bumps along the way. If the stock can exceed its old high on tonight's earnings release, I think it can get to $120 by the end of the year.