Data analysis company Splunk (NASDAQ: SPLK) is scheduled to release its 4QF22 earnings results on March 3. SPLK shares have shed 21.92% in the past year due to challenges the company faced in its accelerated cloud transformation as well as intensifying competition from strong peers.
However, the fourth quarter has typically been the strongest for the company, which is a positive. Ahead of the print, Monness Crespi Hardt analyst Brian White looked into the company’s quarterly developments and pointed out certain key takeaways from his analysis.
Significantly, Splunk’s estimated revenue guidance for the fiscal fourth quarter stands between $740-$790 million. However, White forecasts revenues of $827.4 million, which indicates 11% growth year-over-year. Moreover, White is also optimistic about Splunk reporting earnings of $0.01 per share, against the Street’s expectation of a loss of $0.19 per share.
The analyst is positive about the strength Splunk is expected to have displayed in cloud services. He expects revenues from cloud services to move up to 68% higher year-over-year.
Nonetheless, for the past few years, SPLK’s profitability has been compromised due to the pressures from the expanding cloud transformation industry. “Given Splunk’s challenges over the past few years as the company embarked on an accelerated cloud journey, and faced formidable, next-gen observability competitors, Splunk’s financial performance has been disappointing,” noted White. This may have been an overhang on the FQ4 results as well.
Another impediment to the quarterly performance may have been the instability in the c-suite of Splunk. “In November, Splunk announced that its CEO at that time (Doug Merritt) was stepping down and the company’s Chair (Graham Smith) was named the Interim CEO. Splunk has yet to announce a permanent CEO,” recalled White.
Looking beyond the possible FQ4 results, the analyst said that the first quarter is seasonally the weakest for Splunk. For the first quarter of fiscal 2023 (the current quarter), White expects a 22% year-over-year increase in revenues and a significant loss of $0.68 per share.
With these observations, White reiterated a Hold rating on Splunk. The Wall Street consensus rating is a Moderate Buy, with 13 analysts rating the company a Buy and eight analysts rating it Hold. The average SPLK price target currently sits at $154.41 per share, representing a possible 12-month upside of 32.50%.
Download the TipRanks mobile app now
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Read full Disclaimer & Disclosure.
