Tableau Is Bernstein's Highest Conviction Buy In Mid-Cap Software Space

Bernstein has named Tableau Software Inc (NYSE: DATA) its most likely Outperformer in the Mid-Cap Software Space based on a risk/reward basis and set a price target of $79.

While the stock has lagged over the last 18 months under old management, Bernstein analyst Zane Chrane doesn't expect this trend to continue.

“We believe revenue deceleration was largely due to temporary growing pains, which have been corrected, and the market underappreciates the strength of Tableau's products and ecosystem,” said Chrane.

4 Reasons For A Bull Case With A 27% Upside

1. Tableau should have a higher-than-expected growth rate in Modern Business Intelligence (BI) and the analytics market as Tableau continues to offer the best products in the software industry. Specifically, Chrane highlighted, “Tableau has superior functionality, usability, and business benefits when compared to competitors' solutions by end users and line-of-business leaders.”
2. New CEO Adam Selipsky is transitioning to a more aggressive growth model in order to increase subscription revenue
3. The transition to Cloud should spur greater revenue per customer, and push more individuals to adapt to Tableau software. Chrane stated, “We believe the market does not give sufficient credit to Tableau for its competitive strength in the Business Intelligence market which is growing 20%+ and in which Tableau maintains the dominant share.” Thus, he expects Tableau to beat consensus estimates in both revenue and billings.
4. Chrane noted he isn't aware of any software company with so many growth factors have such a low multiple, and this is what is pushing him to see 27 percent upside in Tableau.

Tableau was trading around $62.40 Wednesday morning.

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