Why Baird Thinks Splunk Will Outperform

In a report published Tuesday, analysts at Baird Equity Research initiated coverage of

with Outperform. The price target is set to $75. The analysts believe that there are various positive changes taking place within the company at present. During FY15, Splunk has promoted various key people and made some important hires. The company has also brought about some changes to its pricing strategy, which should prove favorable, according to the analysts. The company's technology has always been relatively expensive. However, with a reduction in entry-level and Cloud pricing in 2014 and capping of ELA pricing, this should not be a problem anymore. Also, the publishing of list prices offer better predictability to the consumer. "One of Splunk's biggest positives was also one of its biggest negatives: the product could be used to do almost anything. While resulting in a large TAM (perhaps greater than $20B), it also made it difficult to sell… In FY15, management created specialized Groups for IT Operations and Security, which has resulted in improved traction in the Security vertical," the analysts said, while adding that further segmentation was expected in future.