![]() Versus that revenue expectation, Splunk trades at just 7.5x EV/FY23 revenue. Wall Street analysts, meanwhile, are expecting $3.08 billion in revenue for next year (FY23 data from Yahoo Finance), when Splunk's cloud transition is less of a headwind to current revenue. After we net off the $1.88 billion of cash and $2.33 billion of debt on Splunk's most recent balance sheet, the company's resulting enterprise value is $23.13 billion. At Splunk's current share prices near $139, the stock has a market cap of $22.68 billion. ![]() I see significant opportunity for Splunk to expand its presence outside of the U.S.Įspecially with Splunk's year-to-date slide, I think Splunk continues to trade at attractive valuation multiples. Currently, only about ~35% of its revenue base comes from international markets (and an even smaller ~20% slice of the cloud business is overseas). Splunk has become a global brand name, and it's time for Splunk to chase more opportunities overseas. Significant international expansion opportunity.We note as well that Splunk's ~$2.5 billion annual revenue scale makes it nearly three times larger than its next-closest competitor, Datadog. Splunk focuses on visualizing and analyzing machine data (information passively generated by computers, phones, and other endpoints within networks). The company's closest large/public peers are the monitoring companies like Datadog ( DDOG) and New Relic ( NEWR), which primarily focus on monitoring the performance and uptime of applications and infrastructure. It's also the largest company in the space. Splunk isn't without competitors, but the company's focus on machine data is unique.As data volumes continue to explode and companies continue to push the boundaries of how they integrate data into operations and decision-making, Splunk has a tremendous opportunity to derive growth from within its install base. Splunk's platform is charged on a data volumes/computing power basis. Some of the most successful software stocks are usage-based, meaning that revenue climbs proportionally to a customer's usage of the product. But as Splunk has evolved, the company's machine data capabilities are applicable across virtually any industry and across many functions. In its early days, Splunk's machine data-mining capabilities were often used for security purposes to flag and respond to anomalies within corporate systems. The use cases for Splunk are infinite.The fact that a brand-name private equity firm purchased convertible shares at a $160 strike price seems to suggest improving confidence in Splunk's direction.Īs a refresher, here are what I view to be the key pieces of the bullish thesis for Splunk: ![]() The company has gotten broader attention and notice, as well, when late last month Silver Lake announced a $1 billion investment of convertible stock into the company. Over the long run, the fact that Splunk is such an operationally mission-critical software product that is embedded into a company's IT stack, and charged on a recurring basis, makes Splunk into a formidable SaaS business. Splunk was a little later than most of its tech peers in migrating away from an on-premise, license-based business model to a subscription/SaaS offering, but in its most recent quarter the company seems to be showing itself just getting over the jump, and returning to positive total growth. Investors who've followed Splunk for quite some time will be aware that the company is embarking on an ambitious cloud transition. To me, this means Splunk is a relatively uncorrelated play for whom a bounce back is long overdue: This machine data company, one of the original and most highly regarded enterprise software companies in the "big data" space, has seen its share price erode by ~20% year-to-date despite a lack of fundamental red flags (we note that this is a massive underperformance versus the S&P 500, which has gained ~16% since January as of the time of writing). Splunk ( NASDAQ: SPLK) is a strong candidate in this regard. My fear these days is dumping too much of my portfolio in growth and buying in at a market top my focus has been in finding high-quality companies for which a continued rally doesn't mean overstretched valuations. Michael Vi/iStock Editorial via Getty ImagesĪmong the high-profile, large/mid-cap tech stocks, it has become exceedingly difficult to find companies that are still showing promising fundamentals while also trading at decent values. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |