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Splunk's Beat-And-Raise Q1: The Sell-Side Reacts

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Splunk's Beat-And-Raise Q1: The Sell-Side Reacts
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Splunk Inc (NASDAQ: SPLKreported Thursday with a first-quarter non-GAAP loss per share of 7 cents on revenue of $311.6 million, up 37 percent year-over-year.

The results exceeded consensus expectations, which called for a loss of 9 cents on revenue of $297.67 million.

The revenue guidance for the second quarter as well as fiscal 2019 were also above expectations.

The Analysts

  • Bank of America Merrill Lynch analyst Kash Rangan reiterated a Buy rating and increased the price target from $124 to $128.
  • Bernstein analyst Mark Moerdler maintained an Outperform rating and raised the price target from $117 to $136.
  • JMP Securities analyst Greg McDowell maintained a Market Perform rating and hiked the price target from $108 to $120.
  • KeyBanc Capital Markets analyst Rob Owens maintained an Overweight rating and $120 price target.
  • Morgan Stanley analyst Melissa Franchi maintained an Equal-weight rating and increased the price target from $100 to $109.
  • Stifel analyst Brad Reback reiterated a Buy rating and $120 price target.

BofA Sees Accelerating Growth Story

BofA Merrill Lynch's Rangan said he's constructive on Splunk's quarter for the following reasons: 

  • The 37-percent post-ASC 606 revenue growth.
  • The faster growth rate of software revenue relative to total revenue growth.
  • Better-than-expected cash flow from operations and free cash flow.
  • The maintenance of the 11.5-percent operating margin guidance for fiscal 2019. 

Splunk is an accelerating growth story, Rangan said in the note. 

3 Positives Takeaways From Splunk's Q1

Splunk is a beneficiary of continuing momentum, as it remains poised to benefit in the years ahead — especially in the security arena, Bernstein's Moerdler said.

Customers are scaling to multiple use cases across multiple departments with the same data, resulting in strong increases in revenue per customer, the analyst said. 

Splunk is taking steps to accelerate new customer growth, according to Bernstein. 

See also: Splunk Is A Security 'Must-Have,' Wedbush Says In Upgrade

JMP Recommends Stock 

Splunk's leadership in its space; large and expanding total addressable market; more predictable revenue model; and long runway to sustain double-digit growth all render the shares attractive, JMP's McDowell said.

The analyst attributed the negative stock reaction to the below-consensus Q2 operating margin guidance and confusion around billings under ASC 606.

KeyBanc: Buy The Dip 

Security dominates Splunk's story, with the orchestration and automation capabilities that came with the Phantom acquisition extending the value proposition in the high-demand security analytics arena, KeyBanc's Owens said.

The analyst views the quarter as a strong one from the perspective of releases as well as customer additions.

"We would be opportunistic buyers should shares begin to see any meaningful pullback," Owens said.

Morgan Stanley Stays Neutral 

License revenue growth of 35-percent-plus, strength in Splunk Cloud and outperformance in cash flow are among the items Morgan Stanley's Franchi liked in Splunk's Q1 print. 

A slowdown in billings growth that came despite the metric exceeding expectations was a negative, Franchi said. Slow customer additions and the reiteration of cash flow guidance despite the revenue guidance being nudged higher were also downsides, the analyst said. 

Stifel Projects Continued Growth

With the headwinds associated with Splunk's transition to a cloud business model in the rearview mirror, Stifel's Reback said the company can sustain healthy growth, The company can also improve profitability and cash flow generation over the next several years, the analyst said.

The Price Action

Splunk shares have gained about 40 percent year-to-date through Thursday. 

The stock was down 5.2 percent at $110.26 at the close Friday. 

Related Link:

3 Reasons To Get Positive On Splunk After An Impressive Q2

Latest Ratings for SPLK

DateFirmActionFromTo
Sep 2018BarclaysMaintainsOverweightOverweight
Aug 2018Credit SuisseMaintainsOutperformOutperform
Aug 2018Deutsche BankMaintainsBuyBuy

View More Analyst Ratings for SPLK
View the Latest Analyst Ratings

Posted-In: Bank of America Merrill Lynch Bernstein Brad Reback Greg McDowellAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga

 

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