Splunk's Q4 Beat Overshadowed By Q1 Guidance

Shares of Splunk Inc SPLK fell more than 3.5 percent after the company’s below-consensus first quarter forecast marred its otherwise solid fourth quarter beat. However, Baird reiterated its Outperform rating on the stock as it remains bullish on Splunk’s improving go-to-market strategy.

Splunk, which makes data analytics software, reported fourth quarter revenue and EPS of $306.5 million and $0.25. The company also provided FY2018 revenue guidance of $1.18 billion, slightly above guidance issued at analyst day in January.

While the company signed 700 new customers in the quarter, the upside was primarily driven by large upsell orders within existing accounts.

However, Splunk issued first quarter guidance below the Street on both revenue and EPS, forecasting a loss for the quarter versus consensus EPS of $0.02.

Related Link: Splunk Has A 'Clear Path' To $2 Billion In Sales

“As deal sizes increase, there is a trend towards greater seasonality in the business, which resulted in Q1 guidance below Street expectations,” analyst Jason Velkavrh wrote in a note.

Splunk is evolving its go-to-market strategy that could create “additional quarterly lumpiness” despite beneficial over long-term.

That said, the company landed a big contract at FedEx Corporation FDX, which will be using Splunk Enterprise and ITSI to monitor its critical applications.

“Large deal metrics were solid and ASPs continue to increase, with 2017 ending at $69K, higher than historical levels of $40-50K,” Velkavrh continued.

Velkavrh has a price target of $68 on shares, which, at last check, fell 3.8 percent to $62.44.