Growing competition and losses have hurt Splunk’s stock
Previously in the series, we discussed Splunk’s (SPLK) recently announced fiscal 2Q16 and 2016 results. Though Splunk continued to report double-digit growth in its revenues, its GAAP loss continues to be a source of concern for investors. This concern is magnified in the current gloomy scenario that is hovering around the technology sector.
The technology sector on a whole is going through some volatile times. Tableau Software (DATA) and LinkedIn (LNKD) issued weaker-than-expected guidance for 2016. This news not only caused their shares to tumble but created a ripple effect in the entire technology sector. Cybersecurity players’ stocks like Palo Alto Networks (PANW), FireEye (FEYE), CyberArk (CYBR), and Proofpoint (PFPT) suffered declines in the range of 7–13%. Growing competition in the big data space, as we have discussed previously in the series, also adds to Splunk’s woes.
Splunk’s stock has fallen close to 40% in 2016 to date
Due to the factors listed above, Splunk shares have been hit badly. Since posting its fiscal 3Q16 results, Splunk’s shares fell ~40% in the last 3.5 months. According to the Wall Street Journal, Splunk’s stock fell approximately 40% in 2016 alone. Splunk’s stock reached a peak in February 2014, as the above chart shows. However, since then, Splunk’s stock has been almost on a continuous decline with occasional ups.
In a later part of the series, we will discuss what boosted Splunk’s stock recently. Investors who want to gain exposure to Splunk can consider investing in the iShares Russell 1000 Growth ETF (IWF). IWF has an exposure of ~94% to application software. It invests ~0.05% of its holdings in Splunk.