Splunk's Eligibility As Takeover Target Does Not Surprise This Analyst, Sees A Deal Likely

Needham analyst Mike Cikos reiterated a Buy on Splunk Inc SPLK with a $118 price target.
He noted that his talk of Splunk's eligibility as an acquisition target continues to stir, and he was not surprised.
A report disclosed that Starboard Value had built a position in Splunk, representing just under 5%.
Cikos highlighted that Splunk has been in the rumor mill as a potential takeout candidate for some time.
However, Starboard's Founder & CEO, Jeff Smith, will likely appear in NYC tomorrow at the 13D Monitor Active-Passive Investor Summit to discuss his fundamental thesis on Splunk.
Cikos believed the volume of potential buyout candidates and activist investor agitation indicated a deal was likely.
Smith's expected conference presentation and discussion on Splunk is rallying support for a takeout.
The new CEO Gary Steele did not miss a quarter while at the helm of Proofpoint, Cikos noted.
Furthermore, Steele drove Splunk towards profitable growth. Splunk raised the FY23 operating margin guidance to ~8% (from 0%-2% to start the year), representing a material expansion from -8.2% in FY22.
The analyst viewed the departure of CFO Jason Child as an opportunity for Steele to put 'his guy' in the Chief Financial Officer role. Furthermore, investors believe a new CFO bolsters the margin trajectory story.
Finally, Splunk never walked away from its $1 billion Free Cash Flow target despite the timeframe to achieve the target being pushed further out by model transitions and the pandemic.
Price Action: SPLK shares traded higher by 5.81% at $74.31 on the last check Monday.

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Splunk's Eligibility As Takeover Target Does Not Surprise This Analyst, Sees A Deal Likely