Analyst Note| Nupur Balain |
Narrow-moat Splunk reported better-than-expected first-quarter results that beat our expectations and guidance on a top-line basis. While our long-term thesis on Splunk facing a healthy growth runway remains intact, we see greater uncertainty regarding the bottom-line as the cloud transition wraps up. As a result, we are lowering our fair value estimate for Splunk to $164 from $212, but continue to view shares as undervalued at the moment. In spite of increased uncertainty, the cloud transition continues at a solid pace, with over 50% of software bookings coming from the cloud. We expect sustained cloud penetration, a growing robust product suite, and strong execution to lead to healthy long-term growth.