Splunk Stock Rises After Earnings Beat, Results Seen as ‘Solid’ -Breaking
By Senad Karaahmetovic
Splunk’s shares (NASDAQ:) rose more than 6.5% Thursday in premarket trading after Splunk reported higher-than-expected quarterly revenue and raised its full-year outlook.
In the first quarter of 2018, Splunk reported an adjusted loss of 32c per share, compared to a loss of 91c per share in the previous year. The first quarter revenue was $674.1million, an increase of 34% YoY over the analyst consensus at $622.1 million.
The Q1 gross margin was 70%. This compares to the 65.8% for the previous year and consensus estimates at 73.5%. The adjusted operating margin fell 8.5%, while analysts expected a 22% decline.
Splunk anticipates that Q2’s revenues will be in the $735-$755 range, exceeding analyst predictions of $730million. SPLK projects that the adjusted operating profit will fall by 8%-11% from the estimated -8.3%.
Splunk projects that revenue will reach between $3.3 billion-$3.35 billion over the full year, an increase from its prior forecasts of $3.25 billion-$3.3 billion. Analysts are expecting $3.26 trillion.
The FY 2023 adjusted operating Margin is projected to average around 2.2%. This is higher than its forecast range of 0%-2% and beyond the consensus projection at 0.85%.
“Based on our strong execution, we are raising our full year revenue and profitability outlook and reaffirm our operating cash flow expectation of at least $400 million,” the company said.
Raymond James analyst Adam Tindle saw “solid” results but remains Market Perform-rated.
“Cash flow was strong and supports the potential for an LBO given large private investor involvement at present. We understand the valuation case for SPLK and don’t fight investors that seek to follow “smart money” like Silver Lake and H&F atthese valuation levels, but await a true turn in business fundamentals in order to recommend the stock outside of a valuation/takeout thesis. We’re pointing investors to PING as an alternative on that notion given it shares a similar argument for takeout, but core fundamentals are accelerating in key cloud-based areas in that model vs. decelerating here,” Tindle said in a client note.
Keith Weiss from Morgan Stanley also reiterated the Equal Weight rating, but she is seeing signs that there may be a Splunk more efficient.
“CEO Gary Steel laid out a vision for operating the company more efficiently, speeding decision making, further penetrating the security market and better engaging partners. However, fundamentals were mixed with better revenue offset by weaker net-new ARR/cloud ARR in the quarter, keeping us EW,” Weiss concluded.