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Splunk Drops as CTO Departure Sparks Downgrades

Splunk traded lower Friday after the software developer said its chief technology officer would depart. The report sparked some analyst downgrades.

Shares of Splunk  (SPLK) - Get Splunk Inc. Report dropped Friday after the software developer disclosed that its chief technology officer, Tim Tully, would leave next month. The move sparked a number of analyst downgrades.

Tully will reportedly become a partner at the Menlo Park, Calif., venture-capital firm Menlo Ventures.

Shares of the San Francisco software company at last check dropped 7.9% to $136.67.

Splunk develops web-based application software. The company provides software that collects and analyzes machine data generated by websites, applications, servers, networks, and mobile devices. 

In a Securities and Exchange Commission filing, Splunk said Tully, who is senior vice president and CTO, would depart on May 4.

Tully, who joined the company in 2017, said in a statement reported by Barron's: 

"I’ve been fortunate enough to spot top talent and work with great technical leaders and entrepreneurs during my operating career. 

"And now joining the venture side, I’m excited to help grow and create transformational companies with the next generation of founders.”

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Analysts at Keybanc Capital Markets downgraded the stock to sector weight from overweight and set a price target of $179.

The departure “comes at a tough time” and compounds other risks facing Splunk, including sharper competition, pricing changes, and a transition of the customer base to the Splunk cloud platform, Keybanc analyst Michael Turits said in a note.

"The risk profile now looks balanced, with the departure adding yet another variable added to the equation,” Turits added.

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Citi analyst Tyler Radke said the departure was an incremental negative for the stock, and investors may view the news as “a potential elongation of the transition/ongoing uncertainty.”

Citi has a neutral rating on the stock with a price target of $170.

Rosenblatt Securities, on the other hand said, this was “a relatively minor setback for Splunk as its current product set and vision are well developed and its end markets remain robust."

Analysts at Rosenblatt maintained a buy rating on the stock with a price target of $196 a share.