Drexel Hamilton's Brian White Reiterates Buy On Splunk Following Q2 Results

On Thursday, Splunk delivered better-than-expected results for the second quarter. The company also boosted its revenue outlook for the full year. However, investors did not cheer the results and outlook and dumped the stock on Friday, dragging it down over 5 percent.

Analyst Take

The brokerage pointed that Splunk gained from the Big Data wave to deliver upside in key metrics in the second quarter. For instance, the company could add more than 500 fresh enterprise customers, which exceeded the analyst expectations of 470–480 customers.

Related Link: Investors May Have Grown Numb Of Splunk's Earnings Outperformance

Similarly, the company's license revenue, which was $115.7 million, topped the Drexel's projection of $113.1 million, representing a year-over-year growth of 32 percent. In the same way, maintenance and services revenue exceeded its estimation of $87.2 million. Ultimately, its deferred revenue jumped 45 percent on a year-over-year basis and topped its forecast of $450.6 million.

The brokerage said in the research note to clients, "Splunk continues to pull ahead of the competition with the benefit of scale, brand recognition and technological leadership. Moreover, customer use cases are expanding rapidly, the ecosystem is flourishing and the appetite for security use cases remains robust."

White indicated that its estimates and price objective were under review after the company boosted its full-year sales outlook.

At time of writing, Splunk was down 7.82 percent at $60.01.