Splunk's Swan Dive
The data analytics stock Splunk (SPLK) was downgraded from outperform to neutral with a $127 target by an analyst yesterday morning.
On Wednesday, Splunk reported Q2 beats with upside revenue outlook and announced the $1.1B acquisition of SignalFx.
The stock was down 11% yesterday morning offering investors a good entry point.
Data and the analytics needed with it is all the rage and here to stay, yesterday was a good day to strap on a call spread, a bet that the stock will stay above $100 by September 20th.
Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally.
Its products enable users to investigate, monitor, analyze, and act on data regardless of format or source.
Splunk yesterday announced that it had acquired SignalFx for a total price of about $1.05 billion.
Approximately 60% of this will be in cash and 40% in Splunk common stock. The companies expect the acquisition to close in the second half of 2020.
SignalFx, emerged from stealth in 2015, provides real-time cloud monitoring solutions, predictive analytics and more.
This acquisition will give Splunk an edge in observability and actions per minute (APM) for organizations at every stage of their cloud journey, from cloud-native apps to homegrown on-premise applications.
Splunk will become a power player in the cloud space as it expands its support for cloud-native applications and the modern infrastructures and architectures those rely on.
Big data generates revenue in modern business period.
Dealing for SignalFx directly lifts Splunk in position at the cutting edge of monitoring and observability at massive scale.
SignalFx will support the continued commitment to giving customers one platform that can monitor the entire enterprise application lifecycle.
This deal is about growing a larger pie for everyone, so it's a commendable move that should help Splunk maintain its sales momentum.
Splunk is in an industry expanding fast with global spending on cloud services and infrastructure set to double by 2023, again according to IDC.
Splunk faces a few headwinds such as negative free cash flow and part of the reason is the result of a transition in renewable licensing contracts and subsequent revenue recognition.
Splunk will soon debut their new pricing plans, reducing the cost of its data volume-dependent model to help its customers run more information through the Splunk system.
Free cash flow is now at negative $120 million so far this year, compared to positive $102 million through the first half of last year.
Mushrooming top-line growth for this software company and management giving another upgrade to full-year expectations are the short-term catalysts boosting shares.
Splunk is one of the premium data analytics play out there and a compelling long-term buy.
