Market News

Splunk Drops 18% as CEO Steps Down, Announces Preliminary Fiscal Q3 Results

Data platform Splunk Inc. (SPLK) revealed that its CEO Doug Merritt has stepped down from his position. Following the news, shares of the company plunged 18.1% to close at $137.38 on Monday.  

While Graham Smith, the Chair of Splunk’s Board of Directors will act as the interim Chief Executive Officer with immediate effect, Merritt will serve as an advisor for the smooth transition.  

CEO Achievements 

Merritt has been the President and CEO of Splunk for the past six years.  

Merritt commented, “Splunk has evolved significantly since I joined the team nearly eight years ago, growing from $302 million in revenue in fiscal 2014 to nearly $3 billion in ARR in the third quarter of fiscal 2022. Today, Splunk is the data foundation for tens of thousands of customers around the world, empowering these organizations to turn data into doing, improve security, drive resilience, and unlock innovation.” (See Splunk stock charts on TipRanks) 

Following the resignation, Smith said, “Since his appointment as CEO in 2015, Doug has led Splunk through critical product and business model transformations, which have enabled the company to become the leading data platform across Security, Observability and IT. With the proven success of our ongoing cloud transformation and our team’s strong execution, we are confident that Splunk is well positioned for its next phase of growth.” 

Preliminary Third-quarter 2022 Results 

Meanwhile, the company announced preliminary results for the third quarter of 2022 (ended October 31, 2021). Splunk expects Cloud ARR to be about $1.105 billion, up 75% year-over-year. 

Total ARR is estimated at $2.825 billion, up 37% year-over-year. Additionally, total revenues are likely to be $660 million, up 19%. Meanwhile, non-GAAP operating margin is expected to be around a negative 14%. 

Notably, Splunk is scheduled to report third-quarter results on December 1, 2021, after the market closes. 

See Insiders’ Hot Stocks on TipRanks >> 

Wall Street’s Take 

Following the CEO’s resignation, Truist Financial analyst Joel Fishbein maintained a Buy rating on the stock and a price target of $200 (45.58% upside potential).  

Fishbein considers the CEO transition as “an appropriate time to transition into a new phase.” 

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 16 Buys and 8 Holds. The average Splunk price target of $184.95 implies 34.63% upside potential from current levels. Shares have lost 29% over the past year. 

Risk Analysis 

According to the new TipRanks’ Risk Factors tool, the Splunk stock is at risk mainly from three factors: Finance and Corporate, Ability to Sell, and Tech & Innovation, which contribute 35%, 22%, and 20%, respectively, to the total 46 risks identified for the stock. 

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