NEW YORK (TheStreet) -- Splunk (SPLK) stock's price target was lowered to $56 by analysts at UBS AG (UBS) on Friday while its "buy" rating was maintained by the firm.
UBS cited industry contraction for the lowered price target despite what it sees as solid fundamentals at the company.
Shares are down -6.4% to $46.86 in pre-market trading today.
Must Read: Warren Buffett's 25 Favorite Stocks
Separately, 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