Why Hortonworks, Inc. Stock Gained 13% in March

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What happened

Stock in data-analytics cloud platform Hortonworks Inc. (NASDAQ: HDP) gained 13.3% in March, according to data from S&P Global Market Intelligence .

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So what

After a tremendous 2017 during which shares rocketed 142%, Hortonworks has experienced modest volatility in 2018. The company's 13% stock gain in March essentially recovered the 10% it gave up in February, a month in which Hortonworks released its fourth-quarter 2017 earnings report.

During the fourth quarter, Hortonworks' revenue surged 44% versus the prior-year quarter, to $75.0 million. For the year, the company's top line improved 42%, to $261.8 million.

Subscription support revenue of $57.8 million in the fourth quarter comprised 77% of total revenue, which indicates the quality and recurring nature of the Hadoop software-provider's revenue. Importantly, gross margin climbed more than 800 basis points during 2017, from 60.8% to 69%. As investors soaked these numbers in, Hortonworks' shares rebounded after their February decline.

Other positive items from the company's earnings, which should continue to support shares until the next release, include Hortonworks' customer-acquisition metrics. In its most recent quarter, Hortonworks closed 20 deals over $1 million, more than doubling its take of nine deals over $1 million in the fourth quarter of 2016. While management cautioned that fourth-quarter average deal size reflected some seasonality, it nonetheless set a quarterly record at $207,000.

Now what

Hortonworks projects 2018 revenue of between $322.0 million and $327.0 million, which, at the midpoint of the range, represents a 25% increase over 2017. Yet management warns that operating income will continue to remain negative, with operating margin projected to fall between negative 48 percent and negative 53 percent.

Still, investors remain optimistic about Hortonworks' prospects. In the fourth quarter of 2017, the company achieved its first quarter of positive operating cash flow -- albeit a meager $6.5 million. This reversal of cash burn is a result of improving margins, and it represents a concrete step toward profitability for Hortonworks.

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Asit Sharma has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.