Why Teradata Stock Is Down 8% on Friday Afternoon

Core Viewpoint - Teradata's stock appears undervalued, but concerns about customer retention and growth prospects raise questions about its future performance [1][6]. Group 1: Stock Performance and Analyst Ratings - Teradata's stock fell approximately 8% following a new sell rating from UBS, indicating potential customer attrition [4][6]. - Analysts project a long-term earnings growth rate of around 13% for Teradata, despite current concerns [5]. Group 2: Revenue Projections and Risks - Teradata aims to achieve $1 billion in annual recurring revenue from its public cloud business by 2025, up from $528 million last year, which represents a tenfold increase over four years [7]. - UBS analyst Austin Dietz forecasts that Teradata may fall short of its targets, estimating $935 million in cloud annual recurring revenue and $405 million in free cash flow [5][7]. - A concerning survey revealed that 6 out of 7 Teradata customers plan to migrate away from the platform within the next 6 to 24 months, raising alarms about future revenue stability [5][7]. Group 3: Valuation Metrics - Teradata's stock trades at over 80 times earnings, which may seem expensive, but it is valued at just 7.4 times its expected free cash flow for 2025, suggesting it could be inexpensive based on that metric [8]. - Even if UBS's survey results hold true, Teradata's shares would still trade at a relatively low multiple of 8.2 [8].