Splunk Raising Target Price $ 68

please see our initial article posted last week

SPLK : NASDAQ : US$61.50
BUY 
Target: US$68.00

COMPANY DESCRIPTION:
Splunk software collects and indexes machine-generated big data coming from the websites, applications, servers, and mobile devices that power business. The firm’s software enables organizations to monitor, search, analyze, visualize and act on massive streams of real-time and historical machine data. Splunk is headquartered in San Francisco, was founded in 2003 and has been public since April, 2012.
All amounts in US$ unless otherwise noted.

Investment thesis


Yesterday we attended Splunk’s annual customer conference and analyst events in Las Vegas. We came away incrementally more confident in the firm’s product roadmap and vision and believe that customer-driven use cases for the firm’s machine data analytics will continue to expand. A steadily growing TAM and likely upward estimate revisions keep us comfortable assigning SPLK shares a premium valuation. With revenues forecast to grow 40%+ this year and 35% next year, even if SPLK shares were to experience a gradual revenue multiple compression from today’s near-industry highs – say something in the range of 15% – investors should still expect double-digit returns, which is enough to maintain our BUY rating.
 “Your Data, No Limits.” Yesterday we attended SPLK’s annual customer conference and analyst events in Las Vegas with nearly 1,850 attendees from more than 45 countries, which was up over 100% compared to 2012.
 Customers love SPLK technology. Our independent conversations with attendees confirmed our supposition that customers are continually finding new use cases for the firm’s machine data analytics. From IT operations, to fraud identity, to energy efficiency, to user experience optimization – the opportunities are nearly boundless. To a person, nearly every customer with whom we spoke to expected their organizations’ spend with Splunk to increase in the coming years.
 Product update. With more than 2,000 new features, Splunk announced the general availability of Splunk Enterprise 6. Key features include simplified data models and a new graphical user interface (GUI), incorporating advanced visualization, that will help democratize the technology so more people within an organization can utilizes Splunk’s advanced analytics.

 

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