How Will Tableau Perform In The Next 3 Years?

by Trefis Team
-6.49%
Downside
97.18
Market
90.88
Trefis
DATA
Tableau Software
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Tableau Software (NYSE:DATA) has seen impressive growth in recent years. Revenue grew at a CAGR of 40% in the last 5 years. However, the operating income has continued to follow a downward trajectory, which is primarily attributed to the company’s continued efforts in expanding its international reach and higher spending on research and development. Reduced upfront costs across product lines due to the introduction of subscription-based licensing, and the expectation of increased adoption of its products going forward, suggests an improved growth outlook. Additionally the company’s efforts in keeping a check on expenses should help it boost its margins.

Currently, we have a price estimate of $66 for Tableau, which is below the current market price. We have also created an interactive dashboard which shows the forecast trends; you can modify the key value drivers to see how they impact the company’s revenues and bottom-line.

Subscription Pricing 

Owing to the introduction of subscription-based licensing, Tableau’s licensing revenues saw a 10% decline in 2017. Despite that, Tableau’s stock price went up by over 40% this year. Subscription pricing and product innovation led to strong uptake of Tableau products. The company managed to add multiple features, such as advanced mapping capabilities, certification to data sources and availability on Linux, in the versions released this year. Lately, the company has been aggressively targeting growth in international markets, as growth in more mature markets such as the U.S. and Canada has slowed down. International revenues witnessed 17% growth and constituted 30% of the company’s overall revenues (200 basis points above the prior year comparable period), which highlights the returns from its increased global footprint. With the expectation of further expansion in the developing countries and product improvement, we expect further uptake of Tableau’s products.

With customer preferences shifting toward cloud-based products, Tableau is leveraging two cost-effective product lines, Tableau Online and Tableau Public, to capitalize on this demand. Both products have seen increased adoption since their launches, which bodes well for the company’s long-term future.

Maintenance Revenue

Tableau is pushing for subscription model, which will result in lower licensing revenue per customer going forward. As the company bundles its maintenance fee in the license subscription fee, we believe that overall maintenance and services revenue per customer will see lower growth as a result of cheaper pricing. However, the growth in customer base should drive the revenues from the segment.

Although the expenses are expected to grow in absolute terms, in order to remain competitive against behemoths such as Microsoft, Oracle and Salesforce, we believe EBITDA will improve with increased expansion and revenues.
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