Here's What Wall Street Thinks Of Splunk's Q4 Earnings

Splunk Inc SPLK reported a top-and-bottom-line beat in its fourth quarter results, which had multiple Wall Street analysts upbeat over the company's outlook.

Price Target And Rating Changes

• Credit Suisse's Brad Zelnick: Outperform rating, price target raised from $88 to $110.
• Susquehanna Financial Group's Anne Meisner: Positive rating, price target raised from $85 to $110.
• Baird Equity Research's Rob Oliver: Outperform rating, price target raised from $100 to $110.

Credit Suisse: 'Blowout' Quarter

Splunk's "blowout" fourth quarter report likely signals the machine data market opportunity is larger than expected and the company is capitalizing on the opportunity, Zelnick said in a note. Most notably, more than 50 percent of the company's sales mix is coming from Security and its role continues to increase in relevance after the Phantom Cyber acquisition.

Management's fiscal 2019 Cloud Billings guidance of $270 million implies a "steady" growth trajectory of 50 percent towards the longer-term 2020 target of $400 million.

Splunk's international performance was "particularly strong" in the quarter as it grew 77 percent from a year ago and accounts for 31 percent of total revenue, the analyst said. Europe appears to be "firmly on track" after experiencing execution issues at the start of the year.

Splunk's earnings report not only reinforces the stock as a top security but also "a top overall pick."

Susquehanna: Strong Finish To 2017

Splunk's "impressive" earnings report marks a "strong finish" to 2017, Meisner said in a note.

Importantly, the company won't be offering billings guidance in the future as it is no longer an important metric given the company's transition towards a recurring revenue model. Management deserves credit for no longer issuing the "highly flawed" metric and investors should focus on recurring revenue growth as a "primary leading indicator" moving forward.

Splunk's transition from 50 percent subscription revenue in fiscal 2018 to 75 percent in fiscal 2020 will result in shorter average invoice duration, the analyst wrote. Specifically, many customers will opt to be billed for subscription contracts on an annual basis. The shift may also impact current billings as the overall order size for a subscription contract is roughly two-thirds the size of a perpetual contract and "optimize the revenue model" over the longer-term.

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Baird: 'Caution' Ahead

Oliver's bullish stance on Splunk dates back to the summer and the stock has gained more than 70 percent since then, the analyst said in a note. Not much of the bullish stance has changed exiting the fourth quarter but a "less aggressive" stance on the stock is warranted, especially when considering a recent change to the sales force team which saw some execution issues.

The "explosion" of big data has naturally resulted in heavy demand for big data products Splunk offers and the company boasts an opportunity for above-average revenue growth and EBIT margin expansion over the coming years, according to Oliver.

Price Action

Shares of Splunk hit a new 52-week high of $101.85. The stock was trading around $99.91, up 6.7 percent on the day, at time of publication.