Is Splunk Inc a Buy After Losing More than 20% in 2022?
June 29 2022 - 5:58AM
Finscreener.org
The decade-high inflation levels
and the consistently increasing interest rates have led to bearish
market sentiment and many growth stocks have tanked miserably. The
tech sector has been one of the most affected ones due to these
macro factors.
California-based
Splunk Inc (NASDAQ: SPLK),
a data management company
is one such beaten-down growth
stock. It has lost close to 20% in the first six months of 2022 and
is trading close to its 52-week low.
However, the stock is still
attractive and the company has a lot of upside potential. Its
Splunk Platform is a real-time data platform for the collection of
data, streaming, indexing, search, reporting, analysis, machine
learning, alerting, and monitoring, and also possesses data
management capabilities. The company also has Splunk Solutions,
Splunk IT Solutions, as well as an ecosystem of solutions
containing various pre-built tools.
Splunk is growing through innovation
It is often said that innovation
is the key to success and Splunk through its consistent innovation
has been heading towards its goals. The company has been actively
innovating its platform and is entering into newer agreements with
more organizations to speed up its growth process.
At the recently held
Global Partner
Summit, Splunk announced
several partnerverse programs to help its 2400+ partners expand and
differentiate their offerings. As per the said program, Splunk will
provide many new features and resources such as the development of
necessary skills, achievement of correct certifications, or
building up capabilities to help the customers in order to support
the expansion of its global partner network.
Apart from the companyU+02019s
partners, the customers will also be able to realize their vision
for security, resilience, and innovation through this
program.
Again, as per another recent
agreement, the company will also help
Nubank, which is also one of the largest digital
financial services platforms in the world, to support about 60
million digital banking customers in the Latin America region. The
said partnership will let Nubank use Splunk’s cloud platform to
improve its interaction across departments. Moreover, the company
will also provide Nubank with its information
requirements.
The pandemic had caused a ruckus
in the market but there have been indeed a few industries that have
actually got benefitted. The cloud computing industry is one of
them. According to a survey by the
Markets and
Markets, the global cloud
computing market might reach $947.3 billion by 2026 from $445.3
billion in 2021 growing at a CAGR of 16.3% between the said
period.
The
machine learning segment
might grow ten-fold to $209 billion
by 2029. Splunk is one of the more notable companies in this space
and should be able to take immense benefit out of these emerging
opportunities.
Splunk beat revenues expectations in Q1
Splunk’s earnings for
Q1 of fiscal 2023
beat market estimates. The company’s
revenue for the quarter grew 34% year-over-year to $674 million
with the revenue from the cloud segment that formed approximately
50% of the total revenue increasing by 66%. It also raised its
full-year revenue and profitability outlook and is expecting to
earn between $3.3 billion and $3.35 billion in revenues and at
least $400 million in operating cash flows by the end of this
year.
Further, the retention rate for
the quarter was as high as 130% and the company had 329 customers
having cloud ARR greater than $1 million showing a 62%
year-over-year increment during the quarter. However, Splunk is
still booking operating losses and for the last quarter alone it
was almost $292 million.
As of this report, Splunk is
trading at $93 and the average analyst target price for the stock
is $135.73, a potential upside of over 45%.
Splunk might not be profitable
now but the above-mentioned factors indicate the company is moving
in the right direction. It has been substantially progressing
towards delivering game-changing technology which is increasing its
popularity further. Splunk is a good addition for a long-term
investor.
Splunk (NASDAQ:SPLK)
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