Splunk is a Zacks Rank #1 (Strong Buy) that develops and markets cloud services and licensed software solutions. The company enables enterprises to gain real-time operational intelligence by harnessing the value of their data.
The stock was a favorite back in 2020, but plummeted over 70% into the 2022 lows. But recently, investors have come back into the stock, helping SPLK almost double off those lows set back in October.
The most recent catalyst was an earnings report that helped the stock jump 25% in just a couple weeks. So the question for investors now is if this strong momentum can continue and if Splunk can ever get back to those lofty 2020 highs.
More about Splunk
The company incorporated in 2003 and is headquartered in San Francisco, California. It employs 8,000 and has a market cap of $20 billion.
The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
The stock has a Zacks Style Score of “B” in Growth and Momentum. However, the stock scores an “F” in Value. The Forward PE is 33 and the stock pays no dividend.
Q4 Earnings
Splunk reported Q2 earnings in late August seeing an 84% EPS beat. The company also raised its full year outlook on the top and bottom line.
Splunk guided Q3 revenue at $1.02-1.04B vs the $986M expected and guided FY24 revenues at $3.93-3.95B vs the $3.90B expected.
Cloud revenue was up 29% y/y and operating margin was 16.7%, up from 3.6% last year.
Their customer base is getting larger as well, with customer with ARR over $1M at 834, which is up 111 year over year.
Estimates Surge
With the strong guidance, analysts were quick to hike estimates and lift price targets.
For the current quarter, we see numbers go from $0.77 to $1.11, a jump of 44%.
Next quarter has been flat, but looking at the current year and next year, we see analyst lifting numbers over the last 30 days.
For the current year, we see estimates have ticked 20% higher going from $3.13 to $3.76. For next year we see a hike of 17%, with analysts lifting numbers from $3.60 to $4.22.
Almost every analyst on the street lifted their price targets the day following earrings. Here are a few firms lifting targets:
Wedbush- Reiterated SPLK with a Neutral, price target: $105 from $86
JPMorgan Chase- Reiterated SPLK with Neutral, price target: $120 from $100
RBC- Reiterated SPLK with Outperform, price target: $132 from $125
The Technical Take
Splunk was a post-covid favorite in 2020, hitting highs of $225. But it sold off over the last three years, with the stock falling to $65 before rallying to $125 recently.
The stock is well off its lows, but investors should lower their expectations before thinking $200 is coming soon. It will take a while to repair all that damage and there will be resistance levels up above. Look for $140 and $175 to be issues to the upside.
For those looking for an entry, below are some levels to watch:
21-day Moving Average (MA): $112
50-day MA: 108
200-day MA: $97.50
Fibonacci support (50%): $110
Fibonacci support (61.8%): $107
The $107-110 area would be the buy zone with a lean against the 200-day MA.
In Summary
While it is hard to chase a stock that is up 25% in the last month and almost 100% on the year, Splunk is certainly one to watch.
On the fundamental side, the company is back on track when it comes to earnings and growth. On the technical side, there are buyable pullback setups that investors should be watching for.
Bulls should be looking to accumulate shares at support levels and watch estimates for any big changes in expectations.
Bull of the Day: Splunk (SPLK)
Splunk is a Zacks Rank #1 (Strong Buy) that develops and markets cloud services and licensed software solutions. The company enables enterprises to gain real-time operational intelligence by harnessing the value of their data.
The stock was a favorite back in 2020, but plummeted over 70% into the 2022 lows. But recently, investors have come back into the stock, helping SPLK almost double off those lows set back in October.
The most recent catalyst was an earnings report that helped the stock jump 25% in just a couple weeks. So the question for investors now is if this strong momentum can continue and if Splunk can ever get back to those lofty 2020 highs.
More about Splunk
The company incorporated in 2003 and is headquartered in San Francisco, California. It employs 8,000 and has a market cap of $20 billion.
The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and helps in operational decision making.
The stock has a Zacks Style Score of “B” in Growth and Momentum. However, the stock scores an “F” in Value. The Forward PE is 33 and the stock pays no dividend.
Q4 Earnings
Splunk reported Q2 earnings in late August seeing an 84% EPS beat. The company also raised its full year outlook on the top and bottom line.
Splunk guided Q3 revenue at $1.02-1.04B vs the $986M expected and guided FY24 revenues at $3.93-3.95B vs the $3.90B expected.
Cloud revenue was up 29% y/y and operating margin was 16.7%, up from 3.6% last year.
Their customer base is getting larger as well, with customer with ARR over $1M at 834, which is up 111 year over year.
Estimates Surge
With the strong guidance, analysts were quick to hike estimates and lift price targets.
For the current quarter, we see numbers go from $0.77 to $1.11, a jump of 44%.
Next quarter has been flat, but looking at the current year and next year, we see analyst lifting numbers over the last 30 days.
For the current year, we see estimates have ticked 20% higher going from $3.13 to $3.76. For next year we see a hike of 17%, with analysts lifting numbers from $3.60 to $4.22.
Almost every analyst on the street lifted their price targets the day following earrings. Here are a few firms lifting targets:
Wedbush- Reiterated SPLK with a Neutral, price target: $105 from $86
JPMorgan Chase- Reiterated SPLK with Neutral, price target: $120 from $100
RBC- Reiterated SPLK with Outperform, price target: $132 from $125
The Technical Take
Splunk was a post-covid favorite in 2020, hitting highs of $225. But it sold off over the last three years, with the stock falling to $65 before rallying to $125 recently.
The stock is well off its lows, but investors should lower their expectations before thinking $200 is coming soon. It will take a while to repair all that damage and there will be resistance levels up above. Look for $140 and $175 to be issues to the upside.
For those looking for an entry, below are some levels to watch:
21-day Moving Average (MA): $112
50-day MA: 108
200-day MA: $97.50
Fibonacci support (50%): $110
Fibonacci support (61.8%): $107
The $107-110 area would be the buy zone with a lean against the 200-day MA.
In Summary
While it is hard to chase a stock that is up 25% in the last month and almost 100% on the year, Splunk is certainly one to watch.
On the fundamental side, the company is back on track when it comes to earnings and growth. On the technical side, there are buyable pullback setups that investors should be watching for.
Bulls should be looking to accumulate shares at support levels and watch estimates for any big changes in expectations.