SPLK - Embedded Expectations Analysis - 2020 06 11
Splunk Inc. (SPLK:USA) currently trades near recent averages relative to UAFRS-Based (Uniform) assets, with a 9.3x Uniform P/B. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about cloud conversion, RPO and volume growth, and their sales force alignmentSpecifically, management may lack confidence in their ability to sustain remaining performance obligation (RPO) and $1mn+ order volume growth, operate across all cloud platforms, and transition their perp installed base to the cloud. In addition, they may have concerns about the lack of customer incentives to transition to cloud and the alignment of their sales force in terms of annual contract value (ACV), and they may be overstating their ability to sustain large total contract value (TCV) deal wins. Furthermore, they may be exaggerating opportunities in their core IT markets, their focus on moving to a predominantly cloud model, and the size of their cloud deals. Finally, they may lack confidence in their ability to continue to deliver scale, fidelity, and enterprise features that customers demand, provide security through the expanded use of Splunk, and improve renewal cycles
Splunk provides software solutions that enable users to investigate, monitor, analyze and act on machine data. The company's main product is Splunk Enterprise, a machine data platform, comprised of collection, indexing, search, reporting, analysis, alerting, monitoring and data management capabilities. The company's Splunk Cloud delivers the capabilities of Splunk Enterprise as a service, while Splunk Light provides log search and analysis for information technology environments. The company also provides services that include maintenance and customer support, training services to its customers and channel partners, as well as consulting and implementation services to customers through its services team.
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