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Unusual Social Activity Today Around Splunk (SPLK)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Splunk ( SPLK) as an unusual social activity candidate. In addition to specific proprietary factors, Trade-Ideas identified Splunk as such a stock due to the following factors:

  • SPLK has 11x the normal benchmarked social activity for this time of the day compared to its average of 28.81 mentions/day.
  • SPLK has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $186.7 million.

Identifying stocks with 'Unusual Social Activity' tends to be a valuable process for traders looking to capitalize on the 'talk of the town' stocks that are basking in far more attention from the StockTwits financial community than normal. Good press? Bad press? It ultimately doesn't matter if it's good or bad if you know how to trade around the sentiment. Certain hedge funds use such data for their proprietary algorithms and it is not uncommon to see shared social sentiment play itself out in a stock's price trend.

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More details on SPLK:

Splunk, Inc. provides software solutions that provide real-time operational intelligence in the United States and internationally. Currently there are 15 analysts that rate Splunk a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Splunk has been 3.8 million shares per day over the past 30 days. Splunk has a market cap of $5.8 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.25 and a short float of 5.9% with 1.59 days to cover. Shares are down 27.1% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Splunk as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income and feeble growth in its earnings per share.

Highlights from the ratings report include:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 429.6% when compared to the same quarter one year ago, falling from -$6.16 million to -$32.63 million.
  • SPLUNK INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SPLUNK INC reported poor results of -$0.75 versus -$0.39 in the prior year. This year, the market expects an improvement in earnings ($0.00 versus -$0.75).
  • In its most recent trading session, SPLK has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, SPLUNK INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for SPLUNK INC is currently very high, coming in at 90.99%. Regardless of SPLK's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, SPLK's net profit margin of -32.66% significantly underperformed when compared to the industry average.

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