![]() ![]() Data analytics and cybersecurity solutions often go hand in hand.Ĭybersecurity is a more competitive space, but effective integration could prove a differentiating factor for the many clients who stand by the Splunk platform. As a dominant player in its niche, the company could have a relatively easy time cross-selling new solutions and raising the bar on its total addressable market as it looks to parallel frontiers such as cybersecurity. Splunk is hitting the spot with the consumers it does have. Splunk Can Expand Its Total Addressable Market It’s a painful process, but it has to be done for the sustained betterment of margins.įor now, investors would much rather sell now and ask questions later as growth steadily grinds lower. The cloud transition slowdown may be discouraging, but I suspect the firm will make it through the period as many other Software-as-a-Service (SaaS) firms have in the past. While new customer growth could slide going into a downturn, I view the stickiness of the Splunk platform as a source of strength that could help it climb out of its funk. Many enterprise firms have already cut away at their budgets, with selective layoffs and more cautious hiring practices. Still, its high net retention rate of 129% and digital transformation trends work in Splunk’s favor. With 26-28% in revenue growth expected for its next quarter, questions linger as to how severely growth will stand to be weighed down as enterprise spending looks to grind to a slowdown. ![]() Operating margins improved to a positive 4%, up from the negative double-digits over the same period last year. Splunk’s Strong Net Retention Rates are a Bright Spotįor the second quarter, Splunk posted just shy of $800 million in revenue. Regardless, the mere 5x sales multiple makes Splunk stock far cheaper than traditional “value” stocks that have held up steady for the year thus far. Understandably, the sudden departure of former CEO Doug Merritt still has many investors on edge amid the broader market’s tech-driven valuation reset. However, newly-appointed CEO Gary Steele seems to be the right man to turn the ship around as economic storm clouds look to produce more turbulence. Splunk may be up against it, following its 12% post-earnings flop. Though a slowdown in the cloud transition has investors ready to throw in the towel here, I do think the valuation to be had in the name is the best it’s been in years. With annual recurring revenue (ARR) guidance downgraded from $3.9 billion to $3.65 billion, questions linger as to how Splunk will cope with the harsher environment that lies ahead. ![]() Splunk’s transition has gone far bumpier (and messier for analysts) than many shareholders would have thought. Undoubtedly, transitions to the cloud are always a source of volatility, but they tend to work out in the grander scheme of things. Shares of big-data solutions software developer Splunk ( SPLK) have been struggling lately, thanks in part to an earnings beat that failed to impress over a turbulent cloud transition. ![]()
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