Top Picks Mid-Year Winners: Rob DeFrancesco
07/01/2015 10:00 am EST
In January, MoneyShow asked the nation's leading advisors to select a favorite stock for 2015. In this special series of interviews we are talking with the five advisors who had the top performing stock picks as of mid-year. We begin with Rob DeFrancesco, editor of Tech Stock Prospector, whose Top Pick for 2015 was an analytics software firm that has risen 40%.
Steven Halpern: Our guest today is Rob DeFrancesco, editor of Tech Stock Prospector. How are you doing today, Rob?
Rob DeFrancesco: Doing well, thanks. How are you?
Steven Halpern: Very good. From more than 80 stock ideas that were featured in our annual Top Picks report in January, your favorite stock idea for 2015 was Tableau Software (DATA), which was one of the five top performers having risen some 40%. Congratulations.
Rob DeFrancesco: Thank you.
Steven Halpern: First, could you tell our listeners a little about the company and remind them of your original rationale for picking this stock.
Rob DeFrancesco: Sure. Well, Tableau is the next generation of business intelligence software, it’s visualizing data to give people better insight into what’s going on at a company, organizations, large and small. One of the big positives here is that it’s easier to use than past business intelligence solutions.
Things like Cognos or Business Objects are older applications. And that’s part of the reason why Tableau has been doing so well; companies that have those older applications installed, they’re not being used as much, so their employees are asking for Tableau. So they’re adding on that application as well.
Steven Halpern: Now, perhaps you could walk us through some of the developments that have occurred since last January that would account for such strong gains. Also, if you could give our listeners an updated outlook for the stock, looking ahead towards yearend.
Rob DeFrancesco: Sure. I mean, the stock has had an obviously incredible run. I first recommended it to my subscribers in April of 2014, when it was around 63.5, so it’s had a fantastic run since then. The valuation is stressed.
The growth numbers are there. First quarter revenue was up 75% and there are a couple things happening with Tableau. First, they’re adding an incredible number of new customers, 2,600 in the last quarter.
And, a year ago, in the first quarter, they only added—well not only—but they added 1,800. You can even see as they’re getting larger, they’re adding even more customers.
The other thing is large deals. They’re getting larger deployments across their installed base. There were 249 deals worth over $100,000 in the first quarter. That was up 108% year over year.
Also, international is becoming bigger. They get 24% of their revenue from international. International Q1 was up 89% and they signed the first seven-figure deal in the APAC region, so that gives you an indication that even in international markets they’re gaining some traction.
I would be careful of the stock here as it’s near its high. The revenue for 2015 is supposed to be up 50% and that may be low, actually. Next year, the consensus is showing 35% growth, so you’re still seeing solid growth.
But I would prefer it if the stock were to pull back. It hit a new all-time high right around $124, just in the middle of June. We’re near the high, so I’d be careful chasing this one.
Steven Halpern: Given your view that Tableau might be a bit extended here, within the analytics sector, are there any other ideas that you could highlight that might warrant investor attention at the current time.
Rob DeFrancesco: Yes. You have two smaller companies, Qlik Technologies (QLIK). It’s a smaller company. Not growing as much, but, actually, the revenue is kind of comparable for this year, but Tableau is growing so much larger—so much better—they’re going to pull ahead next year.
Qlik is trading around $35. It did also reach an all-time high of $38 recently. It’s up 23% year-to-date, so it’s not as extended as DATA. It doesn’t have the growth there, but they’re doing some interesting things, where they’re trying to compete better with Tableau by offering more of a self-serve analytics offering.
Another one is a newer company called New Relic (NEWR). New Relic makes cloud-based software that monitors and analyzes Web and mobile applications.
Apps are becoming a big thing, obviously. They’re a big thing and they’re getting even bigger. More people are using apps on their phones, and so, New Relic allows organizations to analyze the data coming in from the apps.
They went public in December at $23, and the stock opened around $30, and it got up to upper $30s, and it’s sort of around the lower $30s now. It’s a smaller company, with a market cap of about $1.6 billion. The fiscal year 2016 ends in March and the growth rate is expected to be somewhere of about 45%.
They’re growing well and I think it’s more of an unknown stock, so it’s one to consider, especially if we get a pullback here in the general market.
In the lower $30s it would be more attractive, but that’s definitely one to watch. Just given that it provides a real time software analytics platform, which has a lot of growth opportunity.
Steven Halpern: Again, our guest is Rob DeFrancesco of Tech Stock Prospector. Thank you so much for joining us today.
Rob DeFrancesco: Great. Thanks Steve.