2/10/2024 0 Comments Splunk stock price last yearThe best way to start learning about a company is with two documents – the latest 10-K and investor deck. While some analysts downgraded the stock because of this, it’s a temporary setback which a solid management team ought to easily navigate. Provided there’s no internal turmoil going on at Splunk (it did appear he may have blindsided them with the news), then it just means the company needs to find a successor for this critical role. The fact that he was poached by a venture capital firm to take his career in an entirely different direction isn’t devastating news. He was responsible for 10 of Splunk’s acquisitions (SignalFx, Omnition, Phantom Cyber, VictorOps, Streamlio, Plumbr, Flowmill, Rigor, Rocana, and SignalSense) and also worked with Splunk’s venture capital arm. While CTO of Splunk, Tim oversaw the company’s shift to the cloud. The CTO DepartsĪ few weeks ago Splunk traded lower on news that their Chief Technology Officer ( CTO) handed in his resignation so that he could join Menlo Ventures as Partner leading the charge in early-stage investments. Splunk’s most recent 8-K is worth mentioning. When checking in on a company, we’ll look at their latest regulatory filings to see what meaningful events have taken place. The product is priced primarily on the amount of data indexed, which is a great business model to have when the amount of big data on this planet is expected to grow exponentially with technologies like global internet, 5G, and IoT. It’s been about 14 months since we last wrote about Splunk, a company that makes sense of “machine data” which is basically the data exhaust that happens as a result of running loads of enterprise apps in an organization. It’s easy to argue we’re buying Splunk’s future revenue growth at a fair valuation relative to its peers. To put that in context, here’s a table that shows relative valuations of enterprise AI/big data stocks using our valuation ratio ( lower is better). We can also use these numbers to produce our standard valuation ratio – market cap / annualized sales – which gives us ( 21 / 2.98) a value of 7. So, there’s a path to continuing revenue growth. That means if the next three quarters are at least $745 million in revenues, Splunk will handily beat last year’s revenues by +33.6%. If we annualize Q4-2021 revenues ( 4 * 745 million) we get $2.98 billion. Our investment methodology focuses on revenue growth as one of the most important metrics to watch, so we’re happy to see that’s back on track. Splunk quarterly revenues – Credit: Yahoo Finance Looking at the annual data shows a company that’s been rocked by The Rona with revenues declining about -5.5% in 2021 ( Corporations use something called a fiscal year, which means their accounting year can be finished even though the actual year isn’t. The first thing we want to look at are some basic financials. What investors should be asking is “has my thesis changed?” In the case of Splunk’s falling stock price ( down -42% from a peak of $219.33 a share), we want to make sure our thesis hasn’t changed as we continue accumulating at these prices. People always Google “why is stock price X falling” when things start going south. Today, we’re going to talk about why Splunk’s annual revenues appear to be falling along with their stock price. Today, both of those positions are in the red, which means we’re accumulating them at an even bigger discount. Of the 32 positions we’re holding right now, two of them we engaged in a bit of market timing on – Alteryx ( AYX) and Splunk ( SPLK) – which dropped -40% and -25% respectively at which time we went long. It provides application programming interfaces, software development kits, and other interfaces that enable its network of third-party developers, partners, and customers to build content that configures and extends its solutions to accommodate specific use cases.No matter how hard we try to follow best practices – diversify, don’t try to time the markets, use dollar cost averaging – we always find ourselves reverting back to bad habits. Splunk Observability includes Splunk Information Technology Service Intelligence, and Splunk Observability Cloud, which provides fully integrated capabilities for Splunk Application Performance Monitoring, Splunk Infrastructure Monitoring, Splunk Real User Monitoring, and Splunk Synthetic Monitoring. Splunk Security includes Splunk Enterprise Security, Splunk Security Orchestration, Automation and Response, Splunk User Behavior Analytics, Splunk Attack Analyzer, and Splunk Mission Control. It offers the Unified Security and Observability Platform, which is comprised of Splunk Security and Splunk S ecurity. (Splunk) is engaged in the development and marketing of cloud services and licensed software solutions.
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