For Some, The Outlook On Splunk Remains Cloudy Despite Q3 Earnings Beat

Regardless of a street-beating and market-moving Q3 report from Splunk Inc SPLK on Tuesday, MKM Partners analyst Kevin Buttigieg remained Neutral on the stock, while raising his price target to $60 from $55. The analyst outlined his positive and negative views on the reports.

• Estimate-beating revenue: $245 million vs. $230 million.
• Accelerated license growth: +2 percent over Q2.
• Estimate-beating operating margins: 6.8 percent vs. 5.4 percent.

• Growth below previous trends of 40 percent.
• Missed differed revenues: $499 million vs. $503 million.

Cannibal Cloud

A key thesis in Buttigieg’s estimate was the “rapid adoption” of Splunk Cloud. The faster-than-expected shift is both cannibalizing license demand and bringing down average order sizes, according to the analyst.

“Splunk said the number of 7-figure deals grew 40 percent year over year, but their average selling prices were down $500,000 Y/Y,” said Buttigieg.

At last check, Splunk was up 3.89 percent at $59.61.