Splunk stock returns
Enterprise software solutions company Splunk (SPLK) fell 4.0% on June 25, 2019, to close trading at $117.99. Splunk stock has lost 13.6% since May 17, and the stock is now up just 12.5% year-to-date.
Splunk has been a solid wealth creator for investors over the years. The stock is up 120.0% in the last three years. However, the stock is now volatile. Investors were first concerned about the company’s cash flow metrics. Splunk has now transitioned to a subscription-based business. This means that customers will be invoiced on an annual basis instead of upfront payments. While subscription revenue should lead to a stable base of recurring revenue for Splunk, it will also affect the company’s operating cash flow in the near term. This, however, should not worry investors too much. Splunk also gained 6.4% on June 10 on Tableau’s (DATA) acquisition news. Splunk stock is currently trading 17.9% below its 52-week high of $143.70.
Of the 43 analysts tracking Splunk, 33 have given it “buys,” ten have given it “holds,” and none have given it “sells.” Analysts have a 12-month median target price of $151.44 on the stock, which indicates a potential upside of 28.3% from its current price.
Splunk’s earnings per share are estimated by analysts to expand by 34.2% this fiscal year, 33.8% in the next fiscal year and by 35.1% in the next five years. Compare this to Splunk’s forward price to earnings multiple of 50.4x and we can see that the stock is expensive. However, as Splunk is a high growth stock, it is expected to command a premium valuation.