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Splunk: The Unstoppable Firecracker

Mar. 03, 2018 8:04 AM ETSplunk Inc. (SPLK)11 Comments
Gary Alexander profile picture
Gary Alexander


  • Splunk shares rose >10% and broke $100 for the first time after reporting Q4 earnings.
  • Revenue growth accelerated yet again to 37% y/y, up from 34% y/y in Q3 (which in itself was already an acceleration from Q2).
  • Cash flow also saw healthy growth, and the company smashed earnings and guidance targets.
  • Demand for data and data services is ramping and doesn't look like it will taper down anytime soon.
  • Despite all the positive signals, shares look fairly valued at 8x forward revenues.

I learned a lesson the hard way when I let go of my Splunk (NASDAQ: SPLK) shares in the fall of last year, missing out on a broad rally that could have taken my position 30-40% higher. And as I looked at Splunk's Q4 report, I'm kicking myself even more as the stock raced ahead to $100. There's no doubt about it: this company has emerged into the spotlight this year as a huge winner.

The bullish story is very evident in Splunk's growth numbers. For some context - Splunk is guiding to a midpoint of $1.625 billion in revenues for the next year, a huge scale that precious few software companies ever reach (I'll caveat this by saying that Splunk is still primarily a license company versus pure SaaS, so it's not exactly an apples-to-apples comparison with the other high-growing software companies in the market). At Splunk's current scale, it's within spitting distance of other software heavyweights like Autodesk (NASDAQ: ADSK) at ~$2 billion in revenues and ServiceNow (NASDAQ: NOW) with ~$2.6 billion. This is, for sure, the upper echelon of software companies that have "made it" into the big leagues.

And despite this scale, Splunk is still growing well north of 30% and accelerating revenues quarter after quarter. Nothing else says success like posting these kinds of numbers.

Furthermore, the demand backdrop for Splunk's services is extremely robust. Companies are scrambling to make themselves more data-driven (or at least appear that way in front of their customers and shareholders). Some companies pay hefty subscription license fees to the likes of Twitter (NASDAQ: TWTR) for access to their data feeds. What Splunk allows you to do is much better - it gives you access to your own data (the "machine data" generated automatically by all your connected endpoints), which is much

ChartSPLK EV to Revenues (Forward) data by YCharts

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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