UPDATE: BTIG Upgrades Splunk (SPLK) to Buy on Improving Checks
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(Updated - January 24, 2022 8:58 AM EST)
BTIG analyst Gray Powell upgraded Splunk (NASDAQ: SPLK) from Neutral to Buy with a price target of $155, citing improving checks and the potential for multiple expansion.
The analyst commented, "We are upgrading SPLK to a Buy rating and introducing a price target of $155/share. In short, our recent channel checks on SPLK have been improving and lead us to believe that the company is turning a corner with its cloud product and observability platform. In addition, we see a few dynamics that could help the stock re-rate to a higher trading multiple over the course of the year. Specifically, we like the accelerated mix shift to cloud. We also see potential for GAAP revenue to better align with ARR trends going forward. And we think Street models significantly underestimate the potential for SPLK’s free cash flow and Rule of 40 score to inflect higher in FY23. If we are right on any of these factors, then SPLK likely deserves a higher multiple than its current ~5.5x 2023E EV/recurring sales vs. closest peers at 7.0x. As a result, we see a favorable risk reward on the stock over the next twelve months."
Shares of Splunk closed at $115.28 yesterday.
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