Splunk shares are gaining ground Wednesday after UBS analyst Karl Keirstead boosted his rating on the IT data analytics and security software provider to Buy from Neutral, lifting his target price to $175, from $137.
Splunk stock (ticker: SPLK) is up 4.4%, at $147.51, in recent trading. The S&P 500 is up 0.2%.
In May, Keirstead had upped his rating to Neutral from Sell, and he’s now convinced that Splunk offers considerable upside. He writes in a research note that key catalysts for the stock include “a more stable tone” from channel check, the prospect that Splunk will return to offering forward guidance with its coming July earnings report, and comfort from the company’s recent $1 billion investment from Silver Lake.
He writes that the improving outlook comes against a backdrop of continued cautious Street sentiment, “making the stock set-up attractive.”
Splunk has been navigating a business-model change, shifting to subscription-based cloud offerings and away from on-premises offerings with perpetual licenses. The transition has been a rocky one, but Keistead writes that “Splunk Cloud appears to have strong traction and Splunk reps are pushing it hard.” He calls that factor “critical,” asserting that investors would tolerate a modest beat for the July quarter if there are strong metrics for the cloud business.
Splunk will report July-quarter results on Aug. 25. For the quarter, the company has projected revenue of $550 million to $570 million, with cloud-based annual recurring revenue of $950 million to $960 million and total ARR ranging from $2.59 billion to $2.61 billion. Keirstead is modeling $2.61 billion in ARR and $574 million in revenue.
Write to Eric J. Savitz at [email protected]
