Shares of Splunk plunged 18.6% in Wednesday’s extended market trading after the data-analytics firm reported worse-than-feared 3Q results and provided a dismal sales outlook. The company flipped to an adjusted loss of $0.07 per share, following earnings of $0.58 in the year-ago period. Analysts had expected earnings of $0.09 per share.
Splunk’s (SPLK) revenues declined 11% to $559 million year-on-year and fell short of the Street consensus of $613 million. Meanwhile, the company reported strong growth across its cloud offerings. Its cloud revenue surged 80% to $145 million year-over-year.
“Our cloud momentum continued in the third quarter, we exceeded our cash flow target significantly and we ended with Cloud ARR up 71% year-over-year — among the highest growth rates in the industry,” said Jason Child, Splunk’s CFO. “While the environment was a challenge in the quarter, we are enthusiastic about the large and growing opportunity ahead and remain confident in our long-term growth trajectory.” (See SPLK stock analysis on TipRanks)
For 4Q, Splunk forecasts revenues of between $650 million and $700 million, lagging Wall Street’s projection of $777.9 million.
On Dec. 1, Monness analyst Brian White reiterated a Hold rating on the stock. In a note to investors, White wrote, “Splunk participates in an industry with strong secular trends and has executed well over the years; however, growth has decelerated sharply this year in the face of a cloud transition, increased competition, and a new economic reality.”
Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 11 Buys, 2 Holds and 1 Sell. The average price target stands at $241.67 and implies upside potential of about 17.4% to current levels. Shares have gained 37.5% year-to-date.
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