Splunk Is An Attractive Asset, Analyst Says After PE Investment In Company

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  • Needham analyst Mike Cikos reiterated a Buy on Splunk Inc SPLK and a $118 price target.
  • Last week, Splunk announced it had entered an agreement with Hellman & Friedman to provide confidential information, so H&F could assess its investment and provide Splunk with perspective on the company's "business, strategy, and finances." 
  • The announcement comes approximately six months after H&F first disclosed its 7.5% position in Splunk. 
  • A 13D filing on September 9 noted that H&F's position has increased to 7.9%, and the Private Equity firm is Splunk's largest active holder.
  • Independent of and before the H&F news, he spoke with Splunk last week to calibrate his sense of investor conversations and revisit the 2HFY23 guide. 
  • Walking away from the call, Cikos was incrementally more positive on shares of Splunk. He views Splunk as an attractive asset.
  • Still, the analyst acknowledged that the demand environment is more tenuous today compared to a few months ago, given commentary on customers' pushouts of Cloud migrations and expansions in the current environment. 
  • However, Cikos believes management has appropriately handicapped these risks with conservatism in the guide. 
  • Also, the focus on profitability and Free Cash Flow demonstrates a more balanced approach by management.
  • Price Action: SPLK shares traded higher by 4.96% at $99.13 on the last check Monday.
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