After a massive run higher, the tech sector has taken a bit of a tumble this week.
The Nasdaq QQQ Invesco ETF has gained nearly 50% since the market bottom on March 23, but since Tuesday, the ETF—which tracks the Nasdaq 100 index, including big names like Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT)—has slipped -2% as investors were spooked by a surge in new coronavirus cases.
Strategic Wealth Partners president Mark Tepper, however, isn’t worried the tech rally is ending, and is being on growth in specific corners of the sector including “cloud, AI, data optimization, advanced chips.”
But while the broader tech sector takes a bit of a breather, Tepper says there’s one stock in the group that should continue to rise higher.
“It’s Cloudera (NYSE: CLDR),” Tepper said. “It’s got maybe a $3-$4 billion market cap so it doesn’t get talked about a lot, but it’s got a lot going for it. We started our position around a year ago at around $6 right before Carl Icahn came, and now it’s around $12.”
Icahn took a big stake in the enterprise cloud-based data analytics and engineering company last August and is now Cloudera’s largest shareholder at 18%.
At the time, BTIG analyst Edward Parker wrote in a note that, “Cloudera is a pure-play single platform company and there’s nothing to breakup, so we’d imagine that the compatible areas of Mr. Icahn’s historical playbook would be restricted to, 1) agitating for a sale, or 2) posing for big expense reductions to boost cashflows.”
And a sale is looking like the most likely move.
Cloudera shares jumped last week when reports surfaced that the company is exploring a potential sale after receiving takeover interest. People familiar with the matter said the company has held discussions with potential buyers including private equity firms, though no final decisions have been made and there’s no guarantee a deal will be reached.
“In our view, IBM (NYSE: IBM) is the most likely strategic buyer, with an outside shot at one of the hyper scale cloud vendors,” said DA Davidson & Co analyst Rishi Jaluria in a note. “Private equity is also likely, in our view.”
Tepper agrees, saying, “If you think about a company like IBM, they already work with Cloudera. IBM’s biggest issue is they don’t know how to innovate, they can’t create anything so they acquire, and at a $3 or $4 billion market cap, this would be a drop in the bucket for them.”