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Why Splunk (SPLK) is an Attractive Portfolio Pick Right Now
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Splunk Inc. is gaining from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall. Earnings estimates for the current fiscal have increased a stellar 412.7% over the past year, while that for the next fiscal are up 85.4%, implying solid inherent growth potential. With healthy fundamentals, this Zacks Rank #1 (Strong Buy) software solutions provider appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Growth Drivers
San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and help in operational decision-making. The company’s software has a broad range of applications, including security analytics, business analytics and IT operations. The valuable insight into machine and big data is allowing users/enterprises to improve service levels, reduce operational costs, mitigate security risks and maintain compliance. This has enabled the company to strengthen its market position.
Splunk’s software can be deployed in a wide variety of computing environments, from a single laptop to large globally distributed data centers as well as public, private and hybrid cloud environments. The company’s top line is benefiting from the high demand for its cloud solutions. Splunk’s ES (Enterprise Security) solutions also hold promise. Users leverage ES to centralize security management on a single platform and better handle the big data scale of their security operations center. It also benefits from the ongoing security threats and information and event management replacement cycle. Further, the company’s integration with Amazon Web Services (AWS) security hub to help customers accelerate detection, investigation and response to potential threats within their AWS security environment is likely to be a key catalyst in the long haul.
In addition, Splunk’s aggressive acquisition strategy has played a pivotal part in developing its business over the last couple of years. The SignalFx acquisition has enabled it to emerge as a leader in cloud monitoring and Application Performance Monitoring for firms transitioning to the cloud. The VictorOps buyout helps it address the needs of DevOps, which is a rapidly growing domain of software engineering. The acquisition of Phantom Cyber aided in the addition of security orchestration, automation and response to Splunk’s portfolio. The buyout of Rocana has strengthened the company’s machine data platform. Splunk is expected to continue pursuing acquisitions in order to expand its portfolio and increase market share over the long term.
The company’s business transition from perpetual licenses to subscription or renewable model is expected to benefit it in the long run. Splunk has been witnessing an increase in the number of renewable term contracts, which is a tailwind. Cloud annual recurring revenues (ARR) in fourth-quarter fiscal 2023 soared 33% year over year to $1.78 billion. The company had 790 customers with ARR greater than $1 million.
The company delivered an earnings surprise of 131.1%, on average, in the trailing four quarters and has a long-term earnings growth expectation of 24.1%.
Other Key Picks
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1, is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Deutsche Telekom AG (DTEGY - Free Report) , sporting a Zacks Rank #1, is likely to benefit from the accretive post-merger integration of T-Mobile US Inc. and Sprite in the United States, in which it owns about 43% stake. The removal of forced cable TV access in multiple dwelling units in Germany through telecom legislation is likely to help Deutsche Telekom expand its broadband market.
Moreover, an aggressive fiber rollout strategy across the country is expected to augment its domestic market hold. The Zacks Consensus Estimate for current-year earnings for Deutsche Telekom has been revised 21.8% upward over the past year. It has a VGM Score of A and a long-term earnings growth expectation of 15.7%. The stock has gained 38% in the past year.
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Why Splunk (SPLK) is an Attractive Portfolio Pick Right Now
Splunk Inc. is gaining from healthy customer engagement, evident from the consistently high net retention and competitive win rates alongside solid momentum with large orders overall. Earnings estimates for the current fiscal have increased a stellar 412.7% over the past year, while that for the next fiscal are up 85.4%, implying solid inherent growth potential. With healthy fundamentals, this Zacks Rank #1 (Strong Buy) software solutions provider appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Growth Drivers
San Francisco, CA-based Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company’s offerings enable users to investigate, monitor, analyze and act on machine data and big data, irrespective of format or source, and help in operational decision-making. The company’s software has a broad range of applications, including security analytics, business analytics and IT operations. The valuable insight into machine and big data is allowing users/enterprises to improve service levels, reduce operational costs, mitigate security risks and maintain compliance. This has enabled the company to strengthen its market position.
Splunk’s software can be deployed in a wide variety of computing environments, from a single laptop to large globally distributed data centers as well as public, private and hybrid cloud environments. The company’s top line is benefiting from the high demand for its cloud solutions. Splunk’s ES (Enterprise Security) solutions also hold promise. Users leverage ES to centralize security management on a single platform and better handle the big data scale of their security operations center. It also benefits from the ongoing security threats and information and event management replacement cycle. Further, the company’s integration with Amazon Web Services (AWS) security hub to help customers accelerate detection, investigation and response to potential threats within their AWS security environment is likely to be a key catalyst in the long haul.
In addition, Splunk’s aggressive acquisition strategy has played a pivotal part in developing its business over the last couple of years. The SignalFx acquisition has enabled it to emerge as a leader in cloud monitoring and Application Performance Monitoring for firms transitioning to the cloud. The VictorOps buyout helps it address the needs of DevOps, which is a rapidly growing domain of software engineering. The acquisition of Phantom Cyber aided in the addition of security orchestration, automation and response to Splunk’s portfolio. The buyout of Rocana has strengthened the company’s machine data platform. Splunk is expected to continue pursuing acquisitions in order to expand its portfolio and increase market share over the long term.
The company’s business transition from perpetual licenses to subscription or renewable model is expected to benefit it in the long run. Splunk has been witnessing an increase in the number of renewable term contracts, which is a tailwind. Cloud annual recurring revenues (ARR) in fourth-quarter fiscal 2023 soared 33% year over year to $1.78 billion. The company had 790 customers with ARR greater than $1 million.
The company delivered an earnings surprise of 131.1%, on average, in the trailing four quarters and has a long-term earnings growth expectation of 24.1%.
Other Key Picks
Arista Networks, Inc. (ANET - Free Report) , sporting a Zacks Rank #1, is likely to benefit from the strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Juniper Networks, Inc. (JNPR - Free Report) carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters.
Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.
Deutsche Telekom AG (DTEGY - Free Report) , sporting a Zacks Rank #1, is likely to benefit from the accretive post-merger integration of T-Mobile US Inc. and Sprite in the United States, in which it owns about 43% stake. The removal of forced cable TV access in multiple dwelling units in Germany through telecom legislation is likely to help Deutsche Telekom expand its broadband market.
Moreover, an aggressive fiber rollout strategy across the country is expected to augment its domestic market hold. The Zacks Consensus Estimate for current-year earnings for Deutsche Telekom has been revised 21.8% upward over the past year. It has a VGM Score of A and a long-term earnings growth expectation of 15.7%. The stock has gained 38% in the past year.