Checks Indicate Continued Momentum At Splunk, Wedbush Says

Splunk Inc SPLK is scheduled to report its second-quarter results after market close on Wednesday. Industry checks indicate strong customer demand for Splunk’s solutions, and the company may post a revenue beat, according to Wedbush.

The Analyst

Wedbush’s Steve Koenig maintained an Outperform rating on Splunk, while lowering the price target from $163 to $158.

The Thesis

The industry has witnessed significantly higher job postings this year, while checks indicate solid demand for Splunk’s solutions, which Koenig said enjoy the reputation of being able to provide visibility to large amounts of data from diverse sources.

Although Splunk’s pricing isn't customer friendly, but competitive risks seem to be longer-term in nature. The company had reset free cash flow guidance in the first quarter, which has “largely de-risked” the billings and bookings estimates for the second quarter and the back half of the year, the analyst said.

He expects the company to deliver a revenue beat of $12 million for the second quarter and believes there is upside to Wedbush’s EPS estimate of 10 cents.

While Splunk may maintain its fiscal 2020 guidance for operating margin and operating cash flow, there is room for the company to increase its full-year revenue guidance by $50 million, Koenig said.

Price Action

Shares of Splunk traded higher by 2% to $128.18 at time of publishing on Tuesday.