Shares of security analytics company Splunk Inc SPLK have come 10 percent off their 2018 high of $112.70, leading an analyst deem the current time and price as an attractive entry point.
The Analyst
Wedbush analyst Steve Koenig upgraded Splunk from Neutral to Outperform and increased his price target from $103 to $118. The analyst attributed the price target revision to the revised estimates and peer multiples.
The Thesis
Splunk's market opportunity, competitive position, and execution on enterprise expansions can sustain its momentum for many quarters, Koenig said in a Friday note, citing his conversations at last week's RSA security conference.
Splunk is emerging as a "key security platform for modern enterprises," the analyst said.
"Our partner checks over the last several quarters point to robust demand growth and bigger projects for Splunk Enterprise and ES," Koening said.
The sharp increase in the company's job postings in the year-to-date period, according to the analyst, is reflective of its business momentum as well as one-time opportunity to boost investments without hurting operating margin in a more favorable ASC 606 accounting regiment.
Although the company faces challenges such as flat new customer adds and limited uptake of its cloud-service as an entry-level offering, Wedbush said these don't look significant enough to slow near-term momentum.
Price Action
At time of writing, shares of Splunk were up 1 percent to $101.78.
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