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Bear of the Day: Splunk Inc. (SPLK)

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Splunk (SPLK - Free Report) stock has underperformed its industry over the last six months and SPLK is down about 10% in the past month. So let’s take a look at the data analytics software company that’s set to report its Q3 earnings results at the start of December.

What’s Splunk?

Splunk is a data analytics software firm that went public in 2012. The company boasts that it “turns data into doing with the Data-to-Everything Platform.” SPLK gets its name from the word spelunking and it explores big data instead of actual caves. The company aims to help firms “investigate, monitor, analyze, and act on data at any scale, from any source over any time period.”

SPLK has thrived in the big data age, with its sales up from $451 million in 2015 to $2.36 billion last year (fiscal 2020). That said, the company reported back to back adjusted losses, and its second quarter results came in below Zacks estimates.

Splunk’s Q2 revenue also dipped 5%. Luckily, it was not all bad for the firm. “Splunk’s rapid transformation to the cloud has enabled us to reach key milestones ahead of schedule. Cloud ARR growth accelerated to 89%, or $568 Million, far exceeding our expectations,” CFO Jason Child said in prepared remarks. “We also now have nearly 400 customers with ARR in excess of $1 million as more and more businesses embrace our cloud platform.”

 

 

 

 

 

 

 

 

 

 

 

 

 

Outlook

Moving on, Zacks estimates call for Splunk’s adjusted Q3 earnings to tumble 87% from $0.58 per share in the year-ago period to $0.10. Meanwhile, its third quarter revenue is projected to slip 2.3%. Similar trends are projected in the fourth quarter.

Overall, the company is projected to swing from adjusted earnings of +$1.88 to a loss of -$0.34 in fiscal 2021, with its revenue expected to dip roughly 2%. The company is projected to bounce back in a big way in FY22. Nonetheless, SPLK’s longer-term earnings outlook has trended heavily in the wrong direction.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bottom Line

The nearby chart shows that Splunk’s adjusted FY22 EPS estimate fell from $0.82 a share 90 days ago to its current $0.52, with a big drop coming in the last 30 days. This negative earnings revision activity helps Splunk earn a Zacks Rank #5 (Strong Sell) right now SPLK also holds “F” grades for both Value and Growth in our Style Scores system to help it land an overall “F” VGM score.

Splunk might be a stock that is best to avoid for now, especially with it trending in the opposite direction from its industry, down 10% in the last month vs. the Computer Software Services Market’s 4% climb.

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