UBS Cuts Price Target on Splunk (SPLK) to $76 Following 2Q16
UBS maintained a Buy rating on Splunk (NASDAQ: SPLK), and cut the price target to $76.00 (from $82.00), following the company's 2Q16 earnings results. SPLK showed a $5M license beat and $8M total revs beat, that was aided by strong execution in the Americas, upside from healthy state/local government demand, and strong order volumes with SPLK recording its second-highest quarter of 6-figure deals. 3Q revenue was guided to $158-160M, ahead of St's $155M
Analyst Brent Thill commented, "Showing no evidence of typical software seasonality just yet, despite its size, SPLK's fundamentals continued to shine in F2Q. The $5M license beat (+42% y/y) and $8M total revs beat (+46% y/y) was aided by strong execution in the Americas, upside from healthy state/local gov't demand, and strong order volumes with SPLK recording its second-highest quarter of 6-figure deals (327, +45% y/y). With growing contribution from ratable rev sources (bringing greater predictability into the model), expanding margins, and increasing FCF profile there is little to complain about in SPLK's business. But with one of the lowest growth rates and highest multiples amongst its high-growth peer group, the biggest investor pushback on SPLK remains valuation. Yet we continue to remain positive and believe a premium on the stock is justifiable given 1) scarcity value; 2) strength of core technology; 3) demonstrated competitive advantage; and 4) addressability across multiple IT disciplines (and therefore budgets). Maintain Buy."
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Shares of Splunk closed at $64.24 yesterday.