Analyst Resumes Coverage On Splunk On Strong Fundamentals

William Blair analyst Jonathan Ho reinitiated coverage on Splunk Inc SPLK with an Outperform rating.
The analyst sees significant growth opportunities for the company in the observability, cybersecurity and core machine search markets.
The analyst believes Splunk had made considerable operating leverage improvements on cost-saving initiatives and strong cash flow from the earlier shift to annual invoicing.
Ho believes that Splunk is a dominant player in the traditional machine search and SIEM market, with a strong positioning in the observability market. Given the increasing complexity of IT infrastructure, the analyst believes Splunk can service the need of larger enterprises.
As per the analyst, Splunk's pricing model is not constrained by data ingestion and instead focuses on resource utilization. He believes this approach aids the company in offering its customers a strong value proposition.
Ho thinks Splunk's go-to-market model and operating cost savings could help increase sales productivity going forward.
The analyst sees risks such as pricing pressure, large cloud migration delays, slowing dollar-based net retention and ARR growth as matters of concern.
Ho expects revenues of $3.88 billion in 2024 and $4.34 billion in 2025.
Price Action: SPLK shares are trading higher by 0.24% at $92.79 on the last check Wednesday.