The continued popularity of big tech and big data companies capitalizing on the mountain of growth potential from AI, creates high expectations for their stocks. However, not all are performing at market standard, and despite lingering high valuations from the AI wave, some slowdowns and consequent decreases in returns could be expected.
These three big data stocks to sell have had a volatile start to the year and could see further falls. With the overvaluations and less-than-exciting guidance reported investors should be hesitant to buy and, even more so, consider selling before losing more value.
We’ll cover the risks of holding these stocks later this year and why now might be your best time to sell and look elsewhere in big data.
Teradata (TDC)
Teradata (NYSE:TDC) is a large analytics and data software provider. After reporting its Q4 earnings from last year, it crashed in mid-February. Despite some okay showings and beating EPS and quarterly revenue estimates, the unavoidable blow was the guidance for 2024.
The company is shifting primarily to cloud-based subscription software but is losing some in-person customers during this transition. As a result, the revenue guidance of 0% to 2% and adjusted EPS between $2.15 to $2.31 fell short of Wall Street’s expectations.
Due to these weaker-than-expected numbers, analysts at Bank of America (NYSE:BAC) dropped its rating on the stock to Neutral, but the stock could likely see further drops in Q2. While Teradata has an optimistic outlook despite a slower cash flow and sales pace, management’s hopes lay primarily in the second half of this year.
There may be a better time to own Teradata in the future, but the weak guidance and low expectations for a rebound this year mean now is a better time than ever to sell.
Oracle (ORCL)
Oracle (NYSE:ORCL) is a leading tech giant with a big name in data and analytics. Its most recent fiscal 2024 report shows continued cloud, IaaS and SaaS revenue growth. However, the reported rates, 25%, 49%, and 14%, respectively, are nearly identical to the previous quarter.
Beyond that, stagnation also slows growth, as the beginning of last year showed higher growth in all three revenue categories. Compared to significant competitors like Microsoft (NASDAQ:MSFT), Oracle is not maintaining its seat in the big data arena. Oracle had to resort to a joint database cloud system integrated with Microsoft Azure.
Another cause for concern is Oracle’s decrease in buyback commitments and dividends. Despite being overvalued, Oracle is spending the least in 3 years in buybacks this year. In addition, a forward dividend yield of 1.25% is quite underwhelming, especially when many competitors like HP (NYSE:HPQ) offer almost three times that in dividends.
With stagnated growth and little to offer to investors in returns, putting your money elsewhere in a better-valued big data stock could be favorable.
Snowflake (SNOW)
The major cloud software provider Snowflake (NYSE:SNOW) saw a huge drop following the release of its Q4 earnings report and the sudden departure of Frank Slootman, the company’s acting CEO, for the past five years. The main reason for this dip is the weaker-than-hoped-for guidance for fiscal 2025.
While Q4 showed some real promise, beating estimates in adjusted EPS and year-over-year revenue growth, the outlook for this year was almost the polar opposite. Product revenue, which makes up 95% of total revenue, was predicted to rise 22%, a long-time low and missing analyst estimates of 30%.
While Snowflake is valued relatively high, it could be an excellent time to sell. Snowflake is a promising company in big data but will undoubtedly face further drops given the anticipated slowdowns in revenue growth.
On the date of publication, Joel Lim did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
