Splunk: We Are Becoming More Constructive On The Stock, Says William Blair

In a research report sent to investors today, William Blair analyst Bhavan Suri maintained a Market Perform rating on Splunk (NASDAQ:SPLK), following the company’s investor day. No price target was given. 

Suri noted, “We came away incrementally positive on the company’s market position and the demand environment for its solutions. Management’s tone was very positive, with an emphasis on the company’s large market opportunity and the strategy it has in place to support long-term growth. Although management was reluctant to size the market from an absolute dollar perspective, it believes Splunk’s transition from being a single-product vendor to a multiproduct platform solution is expanding the company’s market opportunity. The company’s key strategy for capturing this large and growing opportunity is focusing on continually improving the value delivered to customers, primarily by lowering total cost of ownership through regular price reductions and better equipping its salesforce to make solution-based sales via improved subject matter expertise. We like the strategy given the growing number of use-cases (e.g., Web log analysis, application performance monitoring, IT operations, security, and business intelligence) addressed by the company’s solutions and expect it to yield impressive top-line growth in both the near and long term.”

The analyst concluded, “We are maintaining our Market Perform rating for Splunk, but are becoming more constructive on the stock given that shares are trading at a more reasonable valuation versus previous levels and our view that the company is making the right moves to maintain its dominant position amid increasing competition. We compare Splunk with our fast-growth SaaS group. The stock trades at 13.1 times our calendar 2015 revenue estimate versus the group median of 5.9 times. Given that shares still appear to price in near-perfect execution, we will wait for additional data points before revisiting our rating.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Bhavan Suri has a total average return of 3.4% and a 48.1% success rate. Suri is ranked #1337 out of 3319 analysts.

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