Summit Research Downgrades Splunk (SPLK) to Hold

Summit Research downgraded Splunk (NASDAQ: SPLK) from Buy to Hold with a price target of $50.00 (from $84.00).

Analyst Srini Nandury commented, "We are downgrading SPLK to HOLD and establish a new PT of $50 (down from $84). We are NOT calling the F2Q16 quarter by any means and our downgrade is mainly based on our belief that the market is in a correction mode driven by macro fears. We believe the tech stocks are in for a major correction and high flyers such as Splunk with lofty valuations will see their multiples compress more than other players in the market."

The analyst added, "Splunk is currently trading at ~8.4x on EV/C2016 sales, which the peer group trading at an average multiple of 6.3x. Even adjusting for growth and even if the company beats estimates and guides up as we anticipate it will, we cannot foresee how the stock can gain from current levels in the current trading environment. Therefore, we believe it is time to take profits and we will get back in when the valuations ease up. Our $50 PT is based on ~6.5x on EV/C2016 sales of $820, still a premium to the peer group due to higher growth profile."

For an analyst ratings summary and ratings history on Splunk click here. For more ratings news on Splunk click here.

Shares of Splunk closed at $62.13 yesterday.

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