BofA Raises Splunk Target On Annual Recurring Revenue Growth

Splunk Inc SPLK can achieve its target of a compounded average growth rate of 40% annual recurring revenue through fiscal 2023 by expanding its existing customer base, according to BofA Securities.

The Splunk Analyst: Kash Rangan maintained a Buy rating for Splunk and raised the price target from $208 to $249.

The Splunk Thesis: BofA considered Splunk’s historical mix of 80% ARR from existing customers and 20% from new customers to arrive at a base case expansion rate of between 121% and 123%, Rangan said in the Wednesday note. (See his track record here.)

The company has the ability to achieve a net expansion rate of more than 130%, the analyst said. 

Although management has not disclosed this figure, Splunk likely has a net expansion rate higher than its peers, he said. 

With acceleration in digital transformations and the trend of remote teams becoming more permanent, data volumes are expected to grow, Rangan said. With this, “enterprises will turn to Splunk’s best in class technology to ingest, manage, and monitor the increasing data volumes,” the analyst said. 

SPLK Price Action: Shares of Splunk were slipping by 1.18% to $190.80 at the time of publication Wednesday. 

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