Needham & Company Remains Sidelined on Splunk (SPLK) Following 1Q Revenue Beat and Raise
Needham & Company maintained a Hold rating on Splunk (NASDAQ: SPLK) following the company's 1Q earnings report. SPLK reported revenue of $186m, well above the consensus estimate of $174.1m. A loss per share of ($0.02) was in-line with estimates. Revenue guidance for FY17 was raised once again from $880m on the last call to a range of $892-896m, above consensus of $883m. Operating margins, however, remain at 5% despite the revenue increase.
Analyst Scott Zeller commented, "The Splunk F1Q17(Apr) quarter was strong on revenue and billings, but the lack of operating leverage likely disappointed investors. We continue to believe SPLK is performing well in the field, maintaining 40%+ y/y billings growth, but we believe investors are seeking acceleration to revenue/billings as well as operating leverage, as opmgn remains below 10% due to heavy S&M investments. While SPLK beat and raised its revenue outlook for the year, we believe the “maintain” of 5% operating margin outlook may raise questions among investors. We are upping estimates for FY17 and FY18 on revenue, yet lowering our EPS for FY17 and FY18 due to elusive operating leverage. Shares closed near $54.93 and indicated down to $51.22 aftermarket. At $51.22, SPLK is 121x our $0.36 FY18 EPS and 5x EV/FY18 revenue. Maintain HOLD."
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Shares of Splunk closed at $54.93 yesterday.