Raymond James: Splunk Strongly Positioned Despite Increased Competition

Although Splunk Inc SPLK is likely to witness increased competition from additional product offerings in the SIEM/SOAR space, the strength of the company’s platform lies in being able to deal with unstructured data for IT and security, according to Raymond James.

The Analyst

Raymond James’ Michael Turits maintains an Outperform rating on Splunk.

The Thesis

Splunk enjoys a significant first-mover advantage, and the ecosystem has developed around its offering, Turits said in a Thursday note.

The company's opportunities beyond IT are growing and include business analytics, IoT, automation and machine learning, the analyst said. 

Microsoft Corporation MSFT and Chronical have entered the cloud-SIEM space with the recently announced Azure Sentinel and Backstory, Turits siad. Splunk is unfazed by the intensifying competition due to its belief that pricing support will provide a meaningful functional advantage, he said. 

Splunk highlighted its recent EA program enhancements to improve predictability in a meeting with Raymond James, the analyst said. The company has initiatives in place to reduce the total cost of ownership for customers while passing on cloud cost improvements on them, he said. 

Splunk expects 2020 to be its last transitional year in cash flow, with a mix shift to renewable, according to Raymond James. The software company projects normalized cash flow in 2021. 

Splunk also indicated a long runway in growth and said it expects its TAM to exceed $70 billion in the long run, Turits said.

International markets are also expected to make a meaningful contribution to the company’s growth in the future, the analyst said. 

Price Action

Splunk shares were trading up by 2.45 percent at $124.81 at the time of publication Friday. 

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