Brendan Barnicle, Pacific Crest Securities (Outperform; $68 PT)
While many investors were concerned when Splunk lowered price at the low end of its offerings, the company reiterated that its low entry-level pricing is attracting new users and new use cases to Splunk, which ultimately drives the larger deals and larger transactions that came in FQ2.
Splunk's patented algorithms give it a strong competitive advantage, enabling long-term growth of 30% to 40% because the company faces little competition. To maintain its leadership, the company is developing an application ecosystem. As customers adopt these applications, Splunk will assure continued data growth and high renewals. In addition, Splunk is discovering new use cases, which is driving its total addressable market (TAM) beyond our initial expectation of $31.9 billion. As a result, we believe Splunk is well positioned to continue to outperform expectations and its peers.
Greg McDowell, JMP Securities (Market Outperform; $66 PT)
We maintain our Market Outperform rating and $66 price target on Splunk after the company reported F2Q15 earnings of $0.01 versus consensus of ($0.02), with revenue of $101.5 million, up 52% yoy, versus consensus of $93.9 million, and license revenue of $62.1 million versus consensus of $57.6 million, leading the stock to rise 9% in the aftermarket. The license upside in our model was driven by better than expected customer additions (500 versus our estimate of 400), more deals over $100k than we were expecting (226 versus our estimate of 170), and most impressively, Splunk closed more transactions in the quarter than in any other quarter in its history. The company guided well, and meaningfully raised full year revenue guidance, with $426 million in expected revenue at the midpoint versus consensus of $412 million. We like Splunk because we believe it is the company best leveraged to the big data trend, and it attacks a large and under-penetrated market.
Shaul Eyal, Oppenheimer (Outperform; $77 PT)
Results beat SPLK's own revenue plan, and performance was strong across all core metrics. More transactions closed during the Q than during any other Q in the company's history. New products and upgrades were announced during 2Q as management continued to expand the company's reach. Use cases continue to proliferate, driving accelerated adoption, and SPLK continues to evolve into a multi-product company targeting markets with high potential.