Big data facilitating company Splunk Inc SPLK reported Thursday a top- and bottom-line beat in its third-quarter results while management lifted both its 2019 and 2020 sales outlook.
Here is a summary of how some of the Street's top analysts reacted to the print.
The Analysts
- Wells Fargo's Philip Winslow maintains an Outperform rating on Splunk with an unchanged $145 price target.
- Credit Suisse's Brad Zelnick maintains at Outperform, unchanged $130 price target.
- Morgan Stanley's Melissa Franchi maintains at Equal-weight, unchanged $110 price target.
- Jefferies' John DiFucci maintains at Buy, unchanged $137 price target.
- Wedbush's Steve Koenig maintains at Outperform, price target lifted from $130 to $136.
Shares of Splunk were trading higher by 7 percent to $101.63 Friday afternoon.
Wells Fargo: Strong Momentum
Splunk's third quarter showed continued momentum across multiple metrics, Winslow said in a note. These include acceleration of license revenue growth from 36.3 percent in the second quarter to 44.3 percent and marks a return to a more normalized level of growth and the fact that the company signed 111 deals worth more than $1 million.
Splunk Cloud revenue rose from $39 million last quarter to $46 million, while the annual recurring revenue (ARR) nearly doubled from a year ago to $200 million.
Credit Suisse: Splunk Offers Strategic Value
Splunk strong earnings print was broad-based with strength in the Public Sector segment, Zelnick said. The report signals the company continues to address an "increasingly important pillar" of enterprise security strategy and Splunk boasts a "unique leadership" position and a provider of strategic value. It also suggests the company has significant runway ahead in IT Service Intelligence, which is performing well but still has a very low attach rate.
Morgan Stanley: Some Concerns
Splunk's third quarter is highlighted by a healthy growth rate in license revenue (adjusting for elongated duration and a move to subscriptions) and the Cloud ARR nearly doubling to $200 million, Franchi said. Some metrics are a concern, however, including customer additions "staying stubbornly low" at just 500 per quarter and short-term deferred revenue rose just 2 percent quarter-over-quarter and fell well short of consensus estimates.
Management's revised fiscal 2020 revenue guidance implies 24-percent year-over-year growth, which marks a deceleration from 33 percent in fiscal 2019.
Related Link: The Street Reaction To Splunk's Q2
Jefferies: Headwinds And Tailwinds
Splunk's on-premise business has a tailwind ahead in terms of longer duration, but at the same time fewer perpetual contracts serves as a headwind, DiFucci said. The company estimates the year-to-date tailwind from on-premise has been around $40 million, while the strategic shift to renewable contracts (including cloud revenue) represents a $43 million headwind.
Wedbush: Positive Guidance
Splunk's fiscal 2020 revenue guidance of $2.15 billion came in better than the $100 million lift Wedbush modeled, Koenig said. If the company can sustain the momentum seen in the third quarter, there's reason to believe management is being conservative in its outlook.
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