Splunk Stock Rises After Earnings Beat, Results Seen as 'Solid'

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Splunk Stock Rises After Earnings Beat, Results Seen as 'Solid'
Credit: © Reuters.

By Senad Karaahmetovic

Shares of Splunk (NASDAQ: SPLK ) are up more than 6.5% in premarket trading Thursday after the software maker reported better-than-expected Q1 revenue and hiked its full-year forecast.

Splunk reported an adjusted loss per share of 32c in the first quarter, down from a loss per share of 91c in the same period last year. Revenue totaled $674.1 million in the first quarter, up 34% YoY and above the analyst consensus of $622.1 million.

The Q1 gross margin stood at 70%, compared to 65.8% in the year-ago period and consensus estimates of 73.5%. Adjusted operating margin was down 8.5% in the period, while analysts were expecting a decline of 22%.

For Q2, Splunk expects revenue in the range of $735 million to $755 million, topping the analyst expectations of $730 million. SPLK forecasts the adjusted operating margin to be down by -8% to -11%, compared to the estimates of -8.03%.

On a full-year basis, Splunk expects revenue to land between $3.3 billion and $3.35 billion, up from its previous forecast of $3.25 billion to $3.3 billion, while analysts are looking for $3.26 billion.

FY 2023 adjusted operating margin is expected to be around 2%, up from its previous forecast range of 0% to 2%, and above the consensus projection of 0.85%.

“Based on our strong execution, we are raising our full year revenue and profitability outlook and reaffirm our operating cash flow expectation of at least $400 million,” the company said.

Raymond (NS: RYMD ) James analyst Adam Tindle saw “solid” results but remains Market Perform-rated.

“Cash flow was strong and supports the potential for an LBO given large private investor involvement at present. We understand the valuation case for SPLK and don’t fight investors that seek to follow “smart money” like Silver Lake and H&F atthese valuation levels, but await a true turn in business fundamentals in order to recommend the stock outside of a valuation/takeout thesis. We’re pointing investors to PING as an alternative on that notion given it shares a similar argument for takeout, but core fundamentals are accelerating in key cloud-based areas in that model vs. decelerating here,” Tindle said in a client note.

Morgan Stanley analyst Keith Weiss also reiterated an Equal Weight rating although she sees signs of a more efficient Splunk on the horizon.

“CEO Gary Steel laid out a vision for operating the company more efficiently, speeding decision making, further penetrating the security market and better engaging partners. However, fundamentals were mixed with better revenue offset by weaker net-new ARR/cloud ARR in the quarter, keeping us EW,” Weiss concluded.

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