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Category: Stock Market and Splunk
Date: 24 November 2019 Stock Price: $140.50 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
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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 3rd quarter 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise:
- Total revenue: $626.336 million (up from $ 480.983 million for the same quarter of the prior year)
- Total revenue increased by 30.2% over the last 12 months
- Total operating expenses : $566.002 million (up from $441.764 million for the same quarter of the prior year)
- Total operating expenses increased by 28.1% over the last 12 months
- Net loss: -$57.639 million (down from -$55.704 million for the same quarter of the prior year)
- Diluted loss per share: -$0.38 (unchanged from -$0.38 for the same quarter of the prior year)
- Shares outstanding : 152.404 million (up from 146.391 million for the same quarter of the prior year)
- Cash and cash equivalents: $873.470 million
- Cash and cash equivalents per share: $5.73
- Cash and cash equivalents makes up 4.1% of Splunk's market capital
- Cash and cash equivalents makes up 17.2% of Splunk's total assets
- Goodwill in Splunk: $1.278 billion
- Goodwill makes up 25.2% of Splunk's total assets
- Stockholders equity in Splunk: $1.826 billion
- Stockholders equity per Splunk stock: $11.98
- splunk is trading at 11.72 times 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
Splunk's management commentary on their 3rd quarter 2020 earnings
SAN FRANCISCO--(BUSINESS WIRE)--Nov. 21, 2019-- Splunk Inc. (NASDAQ: SPLK), provider of the Data-to-Everything Platform, today announced results for its fiscal third quarter ended October 31, 2019.
“Splunk continues to show the world how our Data-to-Everything Platform is uniquely positioned to bring data to every question, decision and action,” said Doug Merritt, President and CEO, Splunk. “Whether through our groundbreaking innovations like Splunk® Data Fabric Search and Splunk® Data Stream Processor or aggressive acquisition strategy, Splunk is transforming the way our customers around the world turn data into doing.” “With the shift to a renewable model largely complete, momentum in our term license and cloud offerings drove 53% growth in total ARR during the quarter,” said Jason Child, chief financial officer, Splunk.
“Splunk continues to show the world how our Data-to-Everything Platform is uniquely positioned to bring data to every question, decision and action,” said Doug Merritt, President and CEO, Splunk. “Whether through our groundbreaking innovations like Splunk® Data Fabric Search and Splunk® Data Stream Processor or aggressive acquisition strategy, Splunk is transforming the way our customers around the world turn data into doing.” “With the shift to a renewable model largely complete, momentum in our term license and cloud offerings drove 53% growth in total ARR during the quarter,” said Jason Child, chief financial officer, Splunk.
Financial Outlook
The company is providing the following guidance for its fiscal fourth quarter 2020 (ending January 31, 2020): Total revenues are expected to be approximately $780 million. Non-GAAP operating margin is expected to be approximately 23%. The company is updating its previous guidance for its fiscal year 2020 (ending January 31, 2020): Total revenues are expected to be approximately $2.35 billion (was approximately $2.30 billion). Non-GAAP operating margin is expected to be approximately 14% (unchanged from previous guidance).
All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for stock-based compensation and related employer payroll tax, acquisition-related adjustments, and amortization of acquired intangible assets. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of these costs and expenses that may be incurred in the future. The company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal third quarter 2020 non-GAAP results included in this press release.
The company is providing the following guidance for its fiscal fourth quarter 2020 (ending January 31, 2020): Total revenues are expected to be approximately $780 million. Non-GAAP operating margin is expected to be approximately 23%. The company is updating its previous guidance for its fiscal year 2020 (ending January 31, 2020): Total revenues are expected to be approximately $2.35 billion (was approximately $2.30 billion). Non-GAAP operating margin is expected to be approximately 14% (unchanged from previous guidance).
All forward-looking non-GAAP financial measures contained in this section “Financial Outlook” exclude estimates for stock-based compensation and related employer payroll tax, acquisition-related adjustments, and amortization of acquired intangible assets. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, many of these costs and expenses that may be incurred in the future. The company has provided a reconciliation of GAAP to non-GAAP financial measures in the financial statement tables for its fiscal third quarter 2020 non-GAAP results included in this press release.
Splunk (NASDAQ: SPLK) stock price history
The image below obtained from Google, shows the stock price Foot locker (NYSE:FL) for the last 5 years. As the image shows its been a pretty volatile ride for Footlocker shareholders over the last number of years. And while it has been very volatile the underlying trend is downwards. 5 years ago the stock of Foot locker was trading at around $67.10 and its currently trading at $140.50 a stock. That's a significant gain of 109.4% returned to Splunk stockholders.
The stock of Splunk is trading at a lost closer to its 52 week high of $143.70 than it is to its 52 week low of $90.08 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 $143.70 than it is to its 52 week low of $90.08 which to us is a clear indication that the short term sentiment and momentum of Splunk stock is very positive.
Recent coverage of Splunk
The extract below covers the latest earnings release of Foot Locker as obtained from TheStreet.com
Splunk Inc. (SPLK - Get Report) shares traded sharply higher Friday after the data-focused cloud computing group posted stronger-than-expected third quarter earnings and lifted its full-year sales outlook. Splunk said non-GAAP earnings for the three months ending in October came in at 58 cents per share, up 52% from the same period last year and just head of the Street consensus forecast of 54 cents per share. Group revenues also topped estimates, rising 30% from last year to $626 million, thanks for a 40% jump in software revenues -- including license and cloud -- which hit $454 million.
Read the full article here
Splunk Inc. (SPLK - Get Report) shares traded sharply higher Friday after the data-focused cloud computing group posted stronger-than-expected third quarter earnings and lifted its full-year sales outlook. Splunk said non-GAAP earnings for the three months ending in October came in at 58 cents per share, up 52% from the same period last year and just head of the Street consensus forecast of 54 cents per share. Group revenues also topped estimates, rising 30% from last year to $626 million, thanks for a 40% jump in software revenues -- including license and cloud -- which hit $454 million.
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 valuatio 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 $86 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 $86 . A good entry point into the stock of Splunk would therefore be at $77.4 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 valuatio 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 $86 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 $86 . A good entry point into the stock of Splunk would therefore be at $77.4 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 4th quarter and full fiscal 2020 earnings report towards the end of February 2020