![]() Splunk's platform is charged on a data volumes/computing power basis. Some of the most successful software stocks are usage-based, meaning that revenue climbs proportionally to a customer's usage of the product. But as Splunk has evolved, the company's machine data capabilities are applicable across virtually any industry and across many functions. In its early days, Splunk's machine data-mining capabilities were often used for security purposes to flag and respond to anomalies within corporate systems. Here is my full bull case for the company: Longer term, I think Splunk is well-positioned to continue building its sizable ARR base and generating generous profits. We do not view this buying behavior as a demand issue, but rather that of timing as many organizations continue to utilize on-prem Splunk solutions with longer term plans to shift more of their workloads to the cloud." Gary Steele, Splunk's CEO, noted on the recent Q4 earnings call that management doesn't believe any deal cycle elongation in the current environment translates to total loss rather, it's a timing shift:ĭuring Q4, we continued to see cloud migrations and expansions impacted by the macro environment, as well as increased deal scrutiny, which is factored into our guidance for the current year. Near-term deal momentum may suffer, but what is important is that we look for technology companies with huge market potential and category-leading brands that will catch up on lost demand after the current crunch is over. We've heard from almost every software company, of course, that enterprise clients are pulling back on their IT spending amid budget cuts. I remain stoutly bullish on Splunk and am holding onto the name in my portfolio. Up only 5% year to date, I think Splunk has plenty of rebound momentum left to go, especially as the stock sits at less than half of its 2020 highs and is trading at a very reasonable valuation:ĭata by YCharts The bull case for Splunk remains vibrant focus on the long term rather than the current environment This machine data and observability platform is one of the few tech stocks to barely see any price growth this year, despite hitting a fundamental stride after completing a multi-year transition into a subscription-first business. ![]() Splunk ( NASDAQ: SPLK), in particular, is a name I am comfortable doubling down on. In particular, I have my eye on a basket of "growth at a reasonable price" stocks that have not yet seen tremendous year to date appreciation, despite strong fundamental performance in the wake of cloudier macro trends. To beat this market in the current volatile environment, careful stock-picking is the name of the game.
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