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

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For Some, The Outlook On Splunk Remains Cloudy Despite Q3 Earnings Beat
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Regardless of a street-beating and market-moving Q3 report from Splunk Inc (NASDAQ: 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.

Positives

  • 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.

Negatives

  • 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.

Latest Ratings for SPLK

DateFirmActionFromTo
Apr 2017BTIG ResearchInitiates Coverage OnBuy
Mar 2017BernsteinInitiates Coverage OnOutperform
Jan 2017Argus ResearchInitiates Coverage OnHold

View More Analyst Ratings for SPLK
View the Latest Analyst Ratings

Posted-In: Analyst Color Earnings News Guidance Reiteration Analyst Ratings Movers Tech Best of Benzinga

 

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