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Splunk Inc SPLK

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Morningstar’s Analysis

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Economic Moat

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Term Deals Drive Solid Results for Splunk, Cloud Opportunity Remains Substantial; Maintain $164 FVE

Dan Romanoff, CPA Equity Analyst

Analyst Note

| Dan Romanoff, CPA |

Narrow-moat Splunk reported solid second-quarter results, with the top line exceeding both our expectations and guidance, driven entirely by upside in term license revenue. As data volumes rise and cyber threats become increasingly complex and frequent, we view Splunk’s unique comprehensive data platform as increasingly aligning with evolving customer demands. In the quarter, Splunk Observability, IT, and Security Clouds were launched--with the intent of enhancing efficiency and visibility into customers’ tech infrastructure. We believe accelerating demand combined with the success of workload pricing positions Splunk to realize sustained growth and competitive wins as the cloud transition continues apace. Although we expect increasing cloud penetration and an evolving product suite to lead to healthy long-term growth, we are maintaining our fair value estimate for Splunk at $164 per share due to near-term cloud transition-related top-line pressures. With shares rising to $160 in the aftermarket, we view shares as fairly valued.

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Company Profile

Business Description

Splunk provides software for machine log analysis. Its flagship solution, Splunk Enterprise, is employed across a multitude of use cases, including application management, IT operations, and security. The company has historically deployed its solutions on-premises, but the software-as-a-service delivery model is growing in popularity with Splunk Cloud. The company derives revenue from software licenses, as well as cloud subscriptions, maintenance, and support.

Contact
270 Brannan Street
San Francisco, CA, 94107
T +1 415 848-8400
Sector Technology
Industry Software - Infrastructure
Most Recent Earnings Jul 31, 2021
Fiscal Year End Jan 31, 2022
Stock Type Speculative Growth
Employees 6,500

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