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Splunk Dropping, Should I Buy?

Shares in Splunk software dropped 22% overnight. This is on reports of wider than expected company losses. For the quarter, Splunk (ticker: SPLK) posted revenue of $599 million, down 11% from a year ago, and far short of consensus estimate for approx. $613 million. The company had forecast revenue of $600 million to $630 million. Splunk lost 7 cents a share on a non-GAAP basis in the quarter. 

The CEO of splunk came out with the below “There was continued pressure brought on by macro conditions, which resulted in some customers hesitating to commit to long-term contracts. As we reached the end of October, we saw a much lower-than-normal close-rate amongst our largest deals, which caused us to fall short of our bookings target. Overall, our third quarter did not meet our expectations.” Largely blaming the drop on COVID related factors. We find this interesting because in times when companies would be looking at leveraging big data the most, Splunk are struggling to close deals. Keep in mind, splunk software is supposed to help companines find opportunities. 

However in saying this Splunk is one of the fastest growing companines in the world with massive increases to ARR each year.

Although Splunk has admittatly splunked on the quarterly results, there is perhaps a silver lining here. Splunk is trusted and utilsied by 91 of the Fortune 100 companies and boasts massive backers who love their software such as below:

Now if some of the world’s biggest companies are trusting Splunk with their data and it is helping these customers, we can be pretty happy this will continue to grow top line growth as more and more customers continue to sign up. The transition to a subscription based model has also been very sucessful to date. This is a similair strategey that some of the worlds largest companies have adopted due to the large margin’s and sticky revenue.

Prophet Invest is making a little bet on SPLUNK (NYSE)
2k of SPLUNK, and we will buy more on any pullback.

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