William Blair Reiterates Outperform On Splunk As It Delivers Another Solid Beat-And-Raise Performance

In a research report released Friday, William Blair analyst Bhavan Suri reiterated an Outperform rating on Splunk (NASDAQ:SPLK), as the company reported solid fiscal third-quarter results, with revenue of $116 million and non-GAAP earnings per share of $0.02 delivering $9 million and $0.01 of upside to consensus expectations, respectively. No price target was provided.

Suri observed, “We were pleased with the large upward revision and continue to believe the company is well positioned to deliver upside to expectations. Management’s fourth-quarter and full-year revenue guidance ranges imply a significant deceleration in license growth and a downtick in salesforce productivity (based on our estimates), which we believe is an unlikely outcome given that the fourth quarter is seasonally the strongest for the company. Still, given the lumpiness created by the ongoing shift to more enterprise adoption agreements and term deals, we view management’s updated guidance as prudently conservative.”

The analyst concluded, “While we admit shares continue to trade at a relatively rich valuation at an enterprise value of 15 times our calendar 2015 revenue estimate, we believe that the company will be able to continue delivering upside to near-term expectations, which should drive price appreciation without necessitating multiple expansion. Longer term, we believe Splunk’s material technology lead, marginal penetration in what we view as a sizable greenfield market opportunity, and leverage in the model provide ample room for the company to grow into its multiple.”

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 7.1% and a 66.7% success rate. Suri has a 26.3% average return when recommending SPLK, and is ranked #920 out of 3377 analysts.

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