UPDATE: Splunk (SPLK) Beats and Raises but PT Drops to $145 at BofA Securities on Multiple Compression

BofA Securities analyst Brad Sills lowered the price target on Splunk (NASDAQ: SPLK) to $145.00 (from $165.00) despite the company reporting a beat/raise quarter. Total rev of $674.1mn (+34% y/y) exceeded expectations for $624.7mn from large renewal driven,, license upside of $51.1mn. Total and cloud ARR of $3.210bn (+30% y/y)/1.404bn (+60% y/y) were in line/light while RPO/cRPO of $2.395bn/$1.538bn rose +29%/+27% y/y, implying decelerating growth from 35%/30% in Q4. The highlight though was the Operating Margin of -8.5%, well above expectations for a loss of -22.5%.

The analyst reiterated a Buy rating, stating "We view in-line Q1 and outlook for ARR/cloud ARR as a positive, given a challenging environment with executive turnover at all levels in the LTM. Cloud DBNR holding at a solid 130% suggests sustained/healthy demand as customers add more IT & security use cases. FCF conversion did not prompt upside to the FY OCF outlook for >$400mn. This represents 10% ARR margin (at the low end), lagging the FY23 target of 20% outlined in the 2020 Analyst Day. However, with easier annual billings comparison throughout the year, R&D investment that is largely behind, and renewed focus on sales productivity, there is potential for upside as we move through the year."

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