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Stock Strategist

Splunk Makes a Splash in Big Data

But a strong quarter doesn't change our fair value estimate for this data-analytics software firm.

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 Splunk's (SPLK) second-quarter results showed strong revenue growth again, as increasing customer adoption helped alleviate some concerns that competitors are encroaching on the company's turf. This fast-growing segment of the data discovery marketplace is still in the earlier stages of maturation, in our view, allowing for blistering growth rates for multiple participants. We remain comfortable with our $54 fair value estimate and no-moat rating.

Total revenue growth remained strong, at 51.9% year over year to $101.5 million, 9.7% ahead of our forecast. Splunk doubled the license capacity for entry-level customers and lowered the price of Splunk Cloud by 33% during the quarter, helping to drive sales growth and keep the company apace with new competitors. We view these pricing moves as responses to customer feedback and competitive threats, but we still view Splunk as a leader in the event management analysis market.

Norman Young does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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