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Category: Stock Market and Splunk
Date: 23 May 2020 Stock Price: $184.26 We take a look at the 3rd quarter earnings report of their 2020 fiscal year of Splunk, a data to everything platform provider that specialises in data analysis and real data dashboards for companies. The company made a significant loss during the quarter.
COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving - we are seeing some resilient customers complete three-to-five year projects in just months." |
About Splunk
Splunk Inc. (NASDAQ: SPLK) turns data into doing with the Data-to-Everything Platform. Splunk technology is designed to investigate, monitor, analyze and act on data at any scale, from any source over any time period. The Data-to-Everything platform removes the barriers between data and action, so our customers -- regardless of size or business -- have the freedom to deliver meaningful outcomes across their entire organization. Our unique approach to data has empowered companies to improve service levels, reduce operations costs, mitigate risk, enhance DevOps collaboration and create new product and service offerings.
Overview of Splunk's 1st quarter 2021 earnings report
Data below refers to the latest quarter's data unless specified otherwise:
- Total revenue: $434.077 million (up from $ 424.850 million for the same quarter of the prior year)
- Total revenue increased by 2.17% over the last 12 months
- Total operating expenses : $128.617 million (up from $95.823 million for the same quarter of the prior year)
- Total operating expenses increased by 34.2% over the last 12 months
- Net loss: -$305.6 million (down from -$155.429 million for the same quarter of the prior year)
- Diluted loss per share: -$1.94 (unchanged from -$1.04 for the same quarter of the prior year)
- Shares outstanding : 157.534 million (up from 149.060 million for the same quarter of the prior year)
- Cash and cash equivalents: $922.507 million
- Cash and cash equivalents per share: $5.58
- Cash and cash equivalents makes up 3.2% of Splunk's market capital
- Cash and cash equivalents makes up 35.1% of Splunk's total assets
- Goodwill in Splunk: $1.292 billion
- Goodwill makes up 17.6% of Splunk's total assets
- Stockholders equity in Splunk: $1.81 billion
- Stockholders equity per Splunk stock: $11.52
- Splunk is trading at 15.9 imes its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- For some perspective the average price to book value of firms in the S&P 500 is 3.7 Read more about the S&P 500 here
Splunk's management commentary on their 1st quarter 2021 earnings
SAN FRANCISCO--(BUSINESS WIRE)--May 21, 2020-- Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal first quarter ended April 30, 2020.
“COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving - we are seeing some resilient customers complete three-to-five year projects in just months. As customers continue to adapt to this new normal, data matters more than ever, evidenced by our continued strong momentum this quarter,” said Doug Merritt, President and CEO, Splunk. “Data helps save lives. Data reimagines business. I’m extremely proud of our team’s product vision and tenacity as we help our customers bring data to COVID-19 response and help get the world back to work.”
“Our shift to a SaaS model is accelerating with cloud driving nearly half of total software bookings in the quarter with ARR growing 52% year over year,” said Jason Child, chief financial officer, Splunk. “We are also thrilled to have been recently added to the Fortune 1000, which is monumental recognition for a software company and a testament to the importance of data in today’s world.”
“COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving - we are seeing some resilient customers complete three-to-five year projects in just months. As customers continue to adapt to this new normal, data matters more than ever, evidenced by our continued strong momentum this quarter,” said Doug Merritt, President and CEO, Splunk. “Data helps save lives. Data reimagines business. I’m extremely proud of our team’s product vision and tenacity as we help our customers bring data to COVID-19 response and help get the world back to work.”
“Our shift to a SaaS model is accelerating with cloud driving nearly half of total software bookings in the quarter with ARR growing 52% year over year,” said Jason Child, chief financial officer, Splunk. “We are also thrilled to have been recently added to the Fortune 1000, which is monumental recognition for a software company and a testament to the importance of data in today’s world.”
Financial Outlook
The company is providing the following guidance for its fiscal second quarter 2021 (ending July 31, 2020):
The company is providing the following guidance for its fiscal second quarter 2021 (ending July 31, 2020):
- Total revenues are expected to be approximately $520 million.
- Non-GAAP operating margin is expected to be between negative 10% and negative 15%.
Splunk (NASDAQ: SPLK) stock price history
The image below obtained from Google, shows the stock price of Splunk (NYSE:FL) for the last 5 years. And its been a pretty good time for Splunk stockholders. 5 years ago the stock of Splunk was trading at around $67.70 and its currently trading at $184.26 a stock. That's a significant gain of 172.2% returned to Splunk stockholders.
The stock of Splunk is trading at a lost closer to its 52 week high of $185.26than it is to its 52 week low of $93.92 which to us is a clear indication that the short term sentiment and momentum of Splunk stock is very positive.
The stock of Splunk is trading at a lost closer to its 52 week high of $185.26than it is to its 52 week low of $93.92 which to us is a clear indication that the short term sentiment and momentum of Splunk stock is very positive.
Recent Google search trends for Splunk stock price and SPLK stock price
The graphic below shows recent google search trends for Splunk stock price and SPLK stock price over the last 12 months in the United States as obtained from Google Trends. As it shows the trends in these two search terms are very similar and there seems to be consistent interest in the stock price of Splunk
Splunk (NASDAQ: SPLK) stock vs Micro Focus International (LON:MCRO)
The image below shows the stock performance of Splunk (SPLK) compared to that of Micro Focus International (MCRO) over the last 3 years. These companies are competitors even though they are listed on two different exchanges. From the image below it is clear that the stock of Splunk has easily outperformed that of Micro Focus, with splunk returning 119.46% to stockholders over the last 3 years while Micro Focus stock declined by -84.27% over the same period of time.
Recent coverage of Splunk
The extract below covers the latest earnings release of Splunk as obtained from Fool.com
Shares of Splunk (NASDAQ:SPLK) have soared to record highs today, up by 13% as of 11:50 a.m. EDT, after the company reported first-quarter earnings. The results were mixed compared to consensus estimates.
So what
Revenue in the first quarter came in at $434 million, missing Wall Street's expectations of $443 million in sales. That all led to an adjusted net loss per share of $0.56, slightly better than the $0.57 per share in adjusted losses that analysts were modeling for. Annual recurring revenue (ARR) increased 52% to $1.78 billion as Splunk continues its shift to a subscription model.
"COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving -- we are seeing some resilient customers complete three-to-five year projects in just months," CEO Doug Merritt said in a statement. "As customers continue to adapt to this new normal, data matters more than ever, evidenced by our continued strong momentum this quarter."
Now what
The data analytics company's guidance for Q2 calls for revenue of approximately $520 million, with an adjusted operating margin of negative 10% to negative 15%. That top-line forecast is below the consensus estimate of $550.6 million in sales for the coming quarter. However, Merritt noted on the conference call with analysts that the broad shift to remote work had resulted in increased demand for Splunk's cloud-based offerings like Remote Work Insights (RWI), which was introduced in March. Due to ongoing uncertainty surrounding the coronavirus outbreak, Splunk withdrew its guidance for the full fiscal year.
Read the full article here
Shares of Splunk (NASDAQ:SPLK) have soared to record highs today, up by 13% as of 11:50 a.m. EDT, after the company reported first-quarter earnings. The results were mixed compared to consensus estimates.
So what
Revenue in the first quarter came in at $434 million, missing Wall Street's expectations of $443 million in sales. That all led to an adjusted net loss per share of $0.56, slightly better than the $0.57 per share in adjusted losses that analysts were modeling for. Annual recurring revenue (ARR) increased 52% to $1.78 billion as Splunk continues its shift to a subscription model.
"COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving -- we are seeing some resilient customers complete three-to-five year projects in just months," CEO Doug Merritt said in a statement. "As customers continue to adapt to this new normal, data matters more than ever, evidenced by our continued strong momentum this quarter."
Now what
The data analytics company's guidance for Q2 calls for revenue of approximately $520 million, with an adjusted operating margin of negative 10% to negative 15%. That top-line forecast is below the consensus estimate of $550.6 million in sales for the coming quarter. However, Merritt noted on the conference call with analysts that the broad shift to remote work had resulted in increased demand for Splunk's cloud-based offerings like Remote Work Insights (RWI), which was introduced in March. Due to ongoing uncertainty surrounding the coronavirus outbreak, Splunk withdrew its guidance for the full fiscal year.
Read the full article here
Splunk (NASDAQ: SPLK) stock valuation
So based on Splunk's latest earnings report what do we value the company's stock at? It is notoriously hard to value a stock that is loss making and cash generated from operations is negative. Our usual fall back position would be to use the company's stockholders equity per share as the based for a company's stock valuation.
The company continues to show strong top line growth but this eventually needs to feed through to the bottom line of Splunk. For this valuation we will be using the company's gross profits as a starting point for our valuation. Based on our valuation model we have a target (full value) price for Splunk at $97 a stock. We therefore believe the stock of Splunk is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $97 . A good entry point into the stock of Splunk would therefore be at $87.3 or below.
Since the stock of Splunk is trading at almost double our suggested entry point into Splunk we rate the stock of Splunk as a sell. We cannot see how the group can continue to hold on to its current valuation without seeing top line growth starting to reflect in bottom line profits.
The company continues to show strong top line growth but this eventually needs to feed through to the bottom line of Splunk. For this valuation we will be using the company's gross profits as a starting point for our valuation. Based on our valuation model we have a target (full value) price for Splunk at $97 a stock. We therefore believe the stock of Splunk is overvalued
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $97 . A good entry point into the stock of Splunk would therefore be at $87.3 or below.
Since the stock of Splunk is trading at almost double our suggested entry point into Splunk we rate the stock of Splunk as a sell. We cannot see how the group can continue to hold on to its current valuation without seeing top line growth starting to reflect in bottom line profits.
Next earnings release of Splunk (NASDAQ: SPLK)
It is expected that Splunk will release their 2nd quarter 2021 earnings report towards the end of August 2020