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Splunk Stock: Growth and Value Play?

Splunk (NASDAQ:SPLK) is a big-data analytics software play that's fallen drastically out of favor in recent years. It went through a painful revenue recognition transition, making...
Splunk Stock: Growth and Value Play? © Reuters. Splunk Stock: Growth and Value Play?

Splunk (NASDAQ:SPLK) is a big-data analytics software play that's fallen drastically out of favor in recent years.

It went through a painful revenue recognition transition, making it harder for investors and analysts to interpret how the firm has been doing.

Undoubtedly, the company's transition to a subscription-based cloud data monitoring model has made Splunk's quarterly results somewhat weaker than they actually were. Management did make this clear to investors. Yet, Splunk remains something of a question mark as far as cloud companies go.

After yet another rocky year for Splunk stock, and a valuation that looks ever so tempting, I remain neutral on the name. (See SPLK stock charts on TipRanks)

A lot is going on behind the scenes at Spunk. While the stock could prove severely undervalued here, it might be best to take a wait-and-see approach, despite the stock's large number of Buy ratings from analysts.

A Solid Q2 for Splunk

In late August, Splunk reported a mild earnings beat, with an EPS loss of $0.62, beating the consensus estimate by seven cents. Over the past year, it's been hit or miss for Splunk with regard to quarterly earnings. So, this latest round of results was definitely refreshing for Spunk investors who've stayed patient.

For the second quarter, revenue rose 23.2% year-over-year to $605.7 million. Respectable growth for a firm that's continuing to move forward with its transition to the cloud.

While the worst of the transition is likely in the rear-view mirror, investors should expect continued volatility as the firm looks to beef up its ARR (Average Recurring Revenues). Splunk's clients have shown a willingness to stick around, which bodes well for ARR growth in a competitive environment, as the firm looks to improve and expand its suite of offerings.

Still, with uncertainty as to when the company will move into sustained profitability, the stock's rich multiple (shares currently trade at 10.2 times sales), a lack of share price momentum, and significant sales and marketing costs, it might be best to wait on the sidelines for now.

Wall Street's Take

According to TipRanks’ analyst rating consensus, SPLK stock comes in as a Moderate Buy. Out of 22 analyst ratings, there are 16 Buy recommendations, and six Hold recommendations.

The average SPLK price target is $181. Analyst price targets range from a low of $153 per share, to a high of $210 per share.

Bottom Line

Splunk's offering has shown signs of being sticky, and shares may very well march much higher on the other side of the company's cloud transition.

Regardless, the name isn't very timely at this juncture, as the transition could continue to make the numbers look weaker over the time being.

If you're keen on investing in Splunk at this time, you won't be alone. A majority of analysts are bullish on the name. Many are likely looking past the tough transition, to a potentially smoother road ahead.

Disclosure: Joey Frenette doesn’t own shares of any company mentioned at the time of publication.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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19-09-2021 18:12:42 (UTC+7)

EUR/USD

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EUR/USD

1.1724

-0.0040 (-0.34%)

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Moving Avg:

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GBP/USD

1.3736

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USD/JPY

110.00

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AUD/USD

0.7267

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USD/CAD

1.2768

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EUR/JPY

128.97

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US Coffee C Futures

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Euro Stoxx 50

4,130.84

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S&P 500

4,432.99

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15,490.17

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6,963.64

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24,920.76

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US Small Cap 2000

2,233.92

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IBEX 35

8,760.90

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BASF SE NA O.N.

63.085

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Bayer AG NA

45.07

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Allianz SE VNA O.N.

190.23

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Adidas AG

281.60

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Deutsche Lufthansa AG

8.210

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11.080

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 EUR/USD1.1724↑ Sell
 GBP/USD1.3736↑ Buy
 USD/JPY110.00Sell
 AUD/USD0.7267↑ Sell
 USD/CAD1.2768Neutral
 EUR/JPY128.97↑ Sell
 EUR/CHF1.0933↑ Sell
 Gold1,753.95↑ Buy
 Silver22.358Sell
 Copper4.2393↑ Buy
 Crude Oil WTI71.97↑ Buy
 Brent Oil75.31↑ Buy
 Natural Gas5.061↑ Sell
 US Coffee C186.75Buy
 Euro Stoxx 504,130.84↑ Buy
 S&P 5004,432.99Neutral
 DAX15,490.17↑ Buy
 FTSE 1006,963.64↑ Buy
 Hang Seng24,920.76↑ Buy
 Small Cap 20002,233.92↑ Buy
 IBEX 358,760.90↑ Sell
 BASF63.085↑ Sell
 Bayer45.07↑ Sell
 Allianz190.23↑ Sell
 Adidas281.60↑ Sell
 Lufthansa8.210Neutral
 Siemens AG148.76↑ Sell
 Deutsche Bank AG11.080↑ Sell
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,600/ 5,665
(5,600/ 5,665) # 809
SJC HCM5,600/ 5,665
(0/ 0) # 830
SJC Hanoi5,600/ 5,667
(0/ 0) # 832
SJC Danang5,600/ 5,667
(0/ 0) # 832
SJC Nhatrang5,600/ 5,667
(0/ 0) # 832
SJC Cantho5,600/ 5,667
(0/ 0) # 832
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