Stock Trade of the Week: Tableau Software (DATA)

Tableau Software (NYSE: DATA) – is a software company that focuses on business analytics products. The company’s products include analytics and data software, business intelligence platforms, and hosting software.

Tableau’s client roster includes companies from a variety of industries including business services, energy, financial services, healthcare, and others. Tableau is headquartered in Seattle, Washington and it was founded in 2003.

Tableau has seen its earnings grow at an annual rate of 21% over the last three years, but the earnings really grew last quarter, jumping 392% on a year over year basis.

Sales have increased by a rate of 18% per year over the last three years and they grew by 35% in the most recent quarter.

The company is scheduled to release earnings again on April 16.

The management efficiency measurements for Tableau are also good.

The company has a return on equity of 15.3% and a profit margin of 14.6%.

It should also be noted that the company doesn’t have any long-term debt.

The sentiment toward Tableau got my attention just as much as the fundamentals did. There are currently 30 analysts following the stock and only 14 rate the stock as a “buy” while 15 have it rated as a “hold” and one rates it as a “sell”. With a stock like Tableau with good fundamentals, I expect 65 to 75% of the analysts’ ratings to be in the buy category.

In addition to the lack of optimism from analysts, the short interest ratio is currently at 7.9. If the stock continues to rally, the short sellers will add buying pressure as they cover their positions.

We see on the weekly chart that the stock has been moving higher within the confines of a trend channel. The channel is pretty tight and even in the fourth quarter of 2018 when the overall market was tanking, Tableau managed to move higher. The stock did slip below the lower rail of the channel briefly in October, but it rallied sharply from there.

Suggested strategy: Buy DATA with a maximum entry price of $126.00. I would set a target of at least $165.00 over the next 9 to 12 months (for a potential return of 30%-plus from here). I would also suggest a stop at $115.00.

— Rick Pendergraft

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