IB Net Payout Yields Model

Cloudera Completes Hortonworks Merger, Test Lows

After the initial rally following the signed merger between Cloudera (CLDR) and Hortonworks (HDP), the stock has collapsed 50% from those $20 highs. The stock hit pennies away from a new low following their IPO over 18 months ago as the merger closed this morning.

The deal brings together companies that can unlock the power of data in the cloud from the Edge to AI. Or at least that is the promise. The important aspect of the deal is the companies will go from negative operating margins of 19% to positive margins after $125 million in synergies.

Whatever the issue is that is causing investors to flee the stock, Cloudera will rebound as operating margins improve dramatically. The combined company is targeted to reach $960 million in 2019 revenues with the new market cap at $2.6 billion and an enterprise value of only $2.1 billion when considering $500 million in cash.

The stock is just too cheap to pass up on here at $10 or slightly above an EV/S of 2x. Cloud and data stocks just don't trade this low.

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