Why Splunk (SPLK) Stock Is Up Today

NEW YORK (TheStreet) -- Splunk (SPLK) was gaining 6.2% to $48.84 Tuesday following positive notes from Northland Capital and Pacific Crest.

Northlan Capital upgraded the software company to "outperform" from "market perform" based on a valuation, the Splunk's unique product offering, and the small amount of competition in a new market. The firm lowered its price target for Splunk to $66 from $95.

Pacific Crest maintained its "outperform" rating for Splunk while cutting its price target to $68 from $107. The analysts firm said Splunk will likely report better than expected first quarter results. Pacific Crest also predicted the company's revenue will grow more than a25% year-over-year in the long-term.

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TheStreet Ratings team rates SPLUNK INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate SPLUNK INC (SPLK) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. 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 analysis by TheStreet Ratings Team goes as follows:

  • 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.
  • You can view the full analysis from the report here: SPLK Ratings Report

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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.

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