SPLK SEEKING ALPHA INSTALL
SPLK SEEKING ALPHA SOFTWARE

After we net off the $2.49 billion of cash and $3.88 billion of debt on Splunk's most recent balance sheet, the company's resulting enterprise value is $22.32 billion. Of course, with Splunk's latest rally, the stock isn't exactly cheap - but I still think Splunk's valuation leaves room for upside.Īt current share prices near $125, Splunk trades at a market cap of $20.93 billion. I see significant opportunity for Splunk to expand its presence outside of the U.S. Currently, only about ~35% of its revenue base comes from international markets (and an even smaller ~20% slice of the cloud business is overseas). Splunk has become a global brand name, and it's time for Splunk to chase more opportunities overseas.

Significant international expansion opportunity. These commendations don't come lightly to IT buyers when making a purchase decision.

SPLK SEEKING ALPHA SOFTWARE

Gartner, the software industry's leading analyst and reviewer, has bestowed the 'Leader' designation to Splunk in the security information and event management space, and also named it as the vendor with the highest ability to execute. More to the point above, it's fine to have competition when Splunk also is widely considered the best-in-breed vendor for machine data analytics. We note as well that Splunk's ~$4 billion annual revenue scale makes it twice as large as its next-closest competitor, Datadog. Splunk focuses on visualizing and analyzing machine data (information passively generated by computers, phones, and other endpoints within networks). The company's closest large/public peers are the monitoring companies like Datadog ( DDOG) and New Relic ( NEWR), which primarily focus on monitoring the performance and uptime of applications and infrastructure. It's also the largest company in the space. Splunk isn't without competitors, but the company's focus on machine data is unique.

SPLK SEEKING ALPHA INSTALL

As data volumes continue to explode and companies push the boundaries of how they integrate data into operations and decision-making, Splunk has a tremendous opportunity to derive growth from within its install base. Splunk's platform is charged on a data volumes/computing power basis. Some of the most successful software stocks are usage-based, meaning that revenue climbs proportionally to a customer's usage of the product. But as Splunk has evolved, the company's machine data capabilities are applicable across virtually any industry and across many functions. In its early days, Splunk's machine data-mining capabilities were often used for security purposes to flag and respond to anomalies within corporate systems.

These cost measures are additive on top of my existing long-term bull case for Splunk, which I'll reiterate below:

As shown above, Splunk is leaving no stone unturned when it comes to cost, slowing down hiring and streamlining contract labor, ensuring infrastructure efficiency, and rationalizing its real estate footprint. The company continues to build up its ARR base, while leveraging this high-margin revenue stream to capture operating efficiencies and deliver tremendous profitability gains. Splunk is effectively fulfilling the promise of a company that has converted to a high-margin subscription business model. Splunk growth + margin achievements (Splunk Q2 earnings deck) What's new? In a nutshell, the slide below captures how Splunk has surprised us to the upside: Gains picked up steam after Splunk reported a terrific Q2 and lifted its guidance for the balance of the year.Īfter parsing through the company's latest results, in spite of Splunk's massive gains over the past few months, I remain bullish on the name (consistent with my prior view) and have even more conviction in the stock's ability to continue rallying. That's why individual stock selection is so critical.Įnter Splunk ( NASDAQ: SPLK), the machine data software company that has seen a vigorous ~40% jump in its stock price year to date. In the current world of high interest rates, investors need to make sure we're not completely allocating away from equities: but the stocks we pick must be exceptional to compete with ~5% risk-free yields. JHVEPhoto/iStock Editorial via Getty Images

Splk seeking alpha