D.A. Davidson Expecting Nearly 40% Top-Line Growth From Splunk's Q2

The brokerage expects second-quarter revenue to grow 37.9 percent year-over-year to $204.6 million, compared to consensus of $200.5 million and guidance of $198.0 million–$200.0 million. D.A. Davidson sees non-GAAP EPS of $0.05, above consensus at $0.03.

"By segment, we are expecting license revenue to grow 31 percent YoY to $115.2 million and maintenance & services to grow 48.0 percent to $89.3 million," analyst Jack Andrews wrote in a note.

Andrews noted that Splunk has beaten consensus revenue estimates in all of the last 17 quarters, exceeding EPS estimates in 15 of the last 17.

Related Link: Barclays Sees Splunk As Poised For Outperformance, But Maintains Equal Weight Ahead Of Earnings

Meanwhile, Andrews pointed out that bears will be watching license revenue mix, given the increasingly rateable nature of the company's revenue.

That said, the analyst said recent discussions reveal that Splunk brings a strong value proposition to customers, as it is building out a comprehensive ecosystem of technical integrations with numerous partners.

Further, Andrews highlighted that industry sources believe Splunk has a "huge runway of growth" ahead and may become "de-facto operating system for security analytics."

Andrews reiterated his Buy rating and $83 price target on the stock, which is currently up 0.20 percent to $64.98 on the day. The $83 price target represents a potential upside of 28 percent over Tuesday's close.

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