Here’s Why We Believe Tableau Is Worth $120 Per Share

by Trefis Team
Tableau Software
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Tableau Software (NYSE:DATA) is a renowned player in the business intelligence (BI) market. Its stock has surged close to 60% since the beginning of the year as the company continues to deliver strong growth, outperforming the market’s expectations. The company’s solid revenue growth is driven by strong renewal rates due to increased adoption of its subscription-based model. While the transition to the subscription model could weigh on its gross margins in the near term, we expect the company’s investment in smart technologies, such as Tableau Prep, and innovation-driven acquisitions to drive its value in the long term.

We currently have a price estimate of $120/share for the company, which is 5% higher than its market price. View our interactive dashboard – Tableau’s Price Estimate and modify the key drivers to visualize their impact on its valuation.

Strong Adoption To Subscription Model

Being the leader in the BI space, Tableau has grown its customer base from 11,000 in 2012 to over 70,000 in 2017, a compounded annual rate of almost 45% over the last five years. A couple of years ago, Tableau had decided to move from a perpetual licensing model to a subscription-based licensing model for its offerings. In 1Q’17, the company’s ratable license bookings as a percentage of total license bookings stood at merely 26%. However, with the increased demand for cloud-based products and Tableau’s consistent efforts, its ratable license bookings rate had improved to 67% at the end of 2Q’18. This is a significant improvement for the company, indicating solid demand for Tableau’s products.

In order to further capitalize on this demand, the company has been expanding its product offering. In April of this year, the company launched three new subscription offerings – Tableau Creator, Explorer, and Viewer. These are aimed at making Tableau’s capabilities easy to scale and customize and are receiving positive feedback from the company’s clients. Consequently, we expect its customer base to grow to over 82,000 by the end of 2018, which will drive its top-line growth as well as valuation.

Investment In Smart Technologies And Innovation-Driven Acquisitions

In the quest to capture a larger share of the BI sector, Tableau has been working to enhance its product offering by investing in smart and advanced technologies. Recently, the company launched Tableau Prep, a new data preparation product technology that enables its customers to analyze faster in an easy, visual and smart manner. It helps customers uncover insights in their data from machine learning-based recommendations for data sources, tables, and drawings. Also, the company launched Tableau 2018.2, which not only opens its platform to developers with its new Extensions API, but will also mark as a stepping stone for the introduction of Tableau Services Manager, a direct platform to manage server deployments.

In addition, Tableau recently acquired an artificial intelligence (AI) startup, Empirical Systems, a company that specializes in automated statistics. With this deal, Tableau aims to reduce technical complexities in its platform and allow its customers to use sophisticated analytical techniques in their everyday decisions. Further, it has launched over 100 new features and capabilities over the last few quarters to ensure a rapid pace of innovation across its platform. This includes the launch of Hyper, its new data engine technology, and Tableau Server on Linux earlier this year. We believe these new enhanced product offerings, coupled with innovation-driven acquisitions, will boost its revenue as well as valuation in the coming quarters.

Do not agree with our forecast? Create your own price forecast for Tableau by changing the base inputs (blue dots) on our interactive dashboard.

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