Drexel Hamilton's Brian White Expecting A Strong Quarter Out Of Splunk

Splunk Inc SPLK is scheduled to report its F1QY17 results on May 26. Drexel Hamilton's Brian White maintained a Buy rating for the company, with a price target of $80. The analyst commented that a strong quarter could boost Splunk’s shares in FY17.

Splunk’s shares are down 9 percent year-to-date. Analyst Brian White said there seemed to be upside to shares, “given a continuation of the positive fundamental trends that we see ahead.”

Expectations For 1Q

White expects Splunk to modestly beat the revenue estimate of $176.7 million and meet the loss per share estimate of $0.02. Splunk had projected sales of $172-$174 million for the quarter. The analyst indicated that his revenue forecast reflected a 20 percent sequential decline.

“Splunk's April quarter has traditionally been the revenue trough for the year and we expect this pattern to repeat itself in FY:17,” White wrote. Although leading IT vendors had struggled with weak enterprise market demand in 1Q16, Splunk's smaller size, low market penetration and Big Data’s strong secular trend may “keep the company heading in the right direction in FY:17 and beyond.”

Splunk is expected to benefit from a larger number of big deals, rich-ASPs, high win rates, increased penetration in the international markets, continued momentum in security and a growing portfolio.