Barclays Sees Splunk As 'Poised For Outperformance,' But Maintains Equal Weight Ahead Of Earnings

Analyst Ramo Lenschow remained on the sidelines, stating the stock is fairly valued at current year 2017 enterprise value versus sales. The analyst sees cash flow potentially facing pressures if its employees become less content with the stock, since the company's cash flow came mainly from a shift from expenses to stock.

In the last four quarters, the company's EPS has either come in line with the estimates or topped Street expectations. Currently, analysts expect the company to deliver EPS of $0.03 on $200.52 million in revenue.

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The brokerage pointed out that Splunk has guided EPS of $0.03 on revenue of $198 million—$200 million. The revenue forecast suggested a year-over-year growth of 35 percent, termed conservative.

In his research note to clients, Lenschow said, "We believe that investors are really starting to appreciate the success Splunk has had in the shift to a more ratable business model, away from the traditional perpetual license model. Last quarter, the company reported its first Q1 with ratable license bookings representing a majority of the total, even though management has commented that Q1 is usually soft for the ratable mix, thereby showing that Splunk is emerging on the other side."

At time of writing, Slunk was relatively flat on the day, trading at $64.96 and up just 0.17 percent.

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