Splunk: 2Q Should Clear The Way For Improving Sentiment And Investor Reengagement, Says Wedbush

Splunk (NASDAQ:SPLK) yesterday released its second-quarter results, posting revenue of $102M (+52% Y/Y). The company had a billings growth (46% to 48%), license growth (42% to 44%), and the growth of orders greater than $100,000 (27% to 39%). Management raised the full- year revenue guidance range by about $20M, much bigger than last quarter’s raise, on the strength of 2Q bookings, better visibility, and SPLK’s solid execution.

In reaction to the results,Wedbush analyst Steve Koenig today reiterated an Outperform rating with a $67 price target on the stock.

Koenig wrote, “We think sentiment was unduly negative on SPLK, as the bear case on increasing competition was overdone. 2Q results and guidance should help reduce investor uncertainty concerning key operating targets, such as the mix of recurring revenue (25-35% for the year) and quota carriers at year-end (300-310, +40%). Accordingly, we think 2Q should clear the way for improving sentiment and investor reengagement with SPLK to drive a recovery in its share price.”

Koenig added, “As customers apply SPLK to more data and new classes of problems, SPLK is expanding its (currently small) footprint in some large addressable markets, including the $19B IT operations management market, the $5B SIEM market (of which about $1.2B is addressable today), and the $13B business analytics and web intelligence market. SPLK is not the only company marketing log file analysis capability, but our checks suggest SPLK is unmatched in terms of the breadth of its use cases, extensibility, and flexibility, based on its search functionality for unstructured data. The key to SPLK’s differentiation is its ‘log everything’ approach, which enables customers to correlate and combine data from logs, customer activity on websites, and structured business data.” Koenig continued, “Prospects appear good that revenue estimates for SPLK will need to be revised upwards again this year, as customers expand their SPLK deployments and SPLK’s sales additions become productive. We continue to believe SPLK’s sales hiring, sales productivity improvements, and market opportunity support our outlook for significant out-performance against current expectations. Because of SPLK’s rapid sales hiring, only about 60% of direct quota carriers are likely at full productivity; we believe this percentage will increase over the next several quarters as new sales hires develop their pipelines and close deals.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Steve Koenig has a total average return of 6.1% and a 57.7% success rate. Koenig has a -7.9% average return when recommending SPLK, and is ranked #1170 out of 3266 analysts.


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