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Splunk: Time To Buy The Dip, A Rebound Is Coming In 2022

Jan. 04, 2022 12:09 AM ETSplunk Inc. (SPLK)22 Comments
Gary Alexander profile picture
Gary Alexander


  • Shares of Splunk crashed more than 30% since the start of November, a reflection of weakening investor sentiment towards growth.
  • The company's Q3 earnings results came in well above expectations.
  • In particular, Splunk continued a healthy pace of ARR growth as the company continues to make progress on its subscription transition.
  • Valuation looks attractive at ~6.7x FY23 revenue, considering historical averages in the low teens and a current ~40% y/y pace of growth in ARR.
  • I do much more than just articles at Daily Tech Download: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »
White Splunk logo on balloon in urban setting

David Tran/iStock Editorial via Getty Images

When the markets are running for the hills, intrepid and opportunistic investors should take a deeper look and see if there's a bargain to be had. Such is the case with Splunk (NASDAQ:SPLK), a one-time Wall Street darling and

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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 a beneficial long position in the shares of SPLK either through stock ownership, options, or other derivatives. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (22)

Cisco to buy this company for 2 billion. Because contracts still need to be honored, this will be price point.
thirdcamper profile picture
Thanks for this excellent overview. My cousin who has been in tech sector for thirty years speaks extremely highly of Splunk which brought it to my attention a year ago. I tend to be a value investor skittish about half-profitable growth stocks but I finally bought yesterday after noting before doing so that it's near multiyear lows. Could have had for the same price four or five years ago. At only 1.3% of my portfolio, seems a risk worth taking.
Niksurfs profile picture
@thirdcamper - There are a lot after New Year sales going on now in Software land. My guess having been in this business for quite awhile is there is more to come before the tide turns.

This is scorch the earth time, but what survives the fire will open up a nice long run and there will again be fortunes made.
The question as it always is... is when do you sell and how much do you sell and how much do you press.

Good luck my friend of fortune. I think you made a great pick with SPLK. Give it 12-18 months and you will be very pleased with your selection. IMO, we are at or very very near the bottom.
Is this conclusion based on analysis of the technical problems being solved and the track record or just abstract financial estimation as if underlying technological success was of no consequence?
Seems like a stretch to lose the CTO, CEO, Chief architect, and various other leaders in such a short time-span and proceed to talk about a rebound in 2022.
Niksurfs profile picture
@skeptical_engineer - Huge and very smart money has taken the reins of this company, they are making the desired and necessary adjustments to put in the talent/team they want in place for the next chapter.

Silver Lake and the interim CEO who is COTB as well as others...are now in the drivers seat. Buckle up......
@Niksurfs Cool finance story but the founding talent being drenched in a bottomless vat of capital for the last 4 years led to this exact moment. If only technical problems vanished from money alone. Full leadership reset sounds great. Buckle up ... for the beginning of a 5 year process yielding initial results in 2027 incurring similar risk to brand new company formation. The loss of time will also affect the competitive landscape.
Niksurfs profile picture
@skeptical_engineer - Yeah well_ don't buy it
The market is finished for companies that lose tons of money and are valued like golden eggs.
Splunk will tank to $50. Now can anyone tell me why you should value 20Billion a company that is generating a 1B$ loss out of 2.5$ B revenues?
Another positive. SPLK is generating operating cash flow; and that OCF should ramp significantly around 2024 as they execute on the cloud transition.
@knoxmarlow infra transition to cloud is mildly interesting and easy. Product transition from single to multitenant is revolutionary but difficult. That requires calm technical concentration and steady leadership. Hopefully those were both wrapped under the tree for Splunk this year!
pmbrandt profile picture
Per TipRanks, there were 15 analyst targets set Dec 2, with a range of $125-225 and average of $167 +43% from current.
Krishnakumar Doraisamy profile picture
Nice summary. As a daily user of Splunk I believe in the thesis. Do you have a PT?
Niksurfs profile picture
@Krishnakumar Doraisamy - easily 200 by a year from now
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