Splunk Stock is Worth Exploring

Enterprise cloud and data application software solutions provider Splunk NASDAQ: SPLK stock has been rebounding strong with the benchmark indexes in the past few weeks. The cloud-based data analysis and security platform had a very strong close for its fiscal year 2022 smoking consensus analyst estimates on both the top and bottom lines. Additionally, the Company raised its fiscal 2023 guidance across the board indicating the market had massively mispriced shares during the Q1 2022 sell-off. Splunk has a new CEO onboarding on April 11, 2022. The Company continues to grow its base of $1 million annual run rate (ARR) clients rising over 30% yearly. Its platform also empowers cybersecurity teams to be more effective and efficient. Prudent investors seeking a one-stop enterprise cloud play can watch for opportunistic pullbacks in shares of Splunk.

Fiscal Q4 2022 Earnings Release

On March 2, 2022, Splunk released its fiscal fourth-quarter 2022 results for the quarter ended January 2022. The Company reported earnings-per-share (EPS) profits of $0.66 versus a loss of (-$0.20) consensus analyst estimates, an $0.86 beat. Revenues grew 20.9% year-over-year (YoY) to $901 million, beating analyst estimates for $776.38 million. Cloud ARR rose 65% YoY to $1.34 billion. Total ARR rose 32% YoY to $3.12 billion. Cloud revenues rose 69% YoY to $289 million. Customer with over $1 million cloud ARR rose 70% YoY to 317 and customers with total ARR over $1 million rose 32% to 675 customers. Splunk Interim CEO Graham Smith commented, “Q4 was an excellent finish to a strong year for Splunk. Our team delivered across our platform, observability, and security businesses as organizations around the world turned to Splunk to monitor and secure their business-critical infrastructure and applications.”

Upside Guidance 

Splunk raised it fiscal Q1 2023 revenue guidance to come in between $615 million to $635 million versus $608.87 million estimates. The Company sees fiscal full-year 2024 revenues between $3.25 billion to $3.30 billion versus $3.03 billion analyst estimates. Cloud ARR is expected to be at least $2 billion with total ARR around $3.9 billion with non-GAAP operating margin between 0% to 2%.

Conference Call Takeaways

Interim CEO Smith introduced the new CEO Gary Steele as the new CEO effective April 11, 2022, “In addition to a great Q4, I'm equally excited to announce the appointment of Gary Steele, a Visionary Technology executive and Founding CEO of Proofpoint, as the next CEO of Splunk effective April 11. Gary has over 30 years of experience and a track record of successfully scaling SaaS operations and growing multibillion-dollar global enterprises. Over the past two decades, he's led Proofpoint's growth from an early-stage startup to a leading security-as-a-service provider to some of the world's best-known organizations. Gary's software and cybersecurity expertise, deep understanding of recurring revenue models, operational focus and unwavering commitment to driving innovation and customer success will be invaluable to Splunk on our path of $5 billion and beyond.” Smith elaborated on notable customer wins and expansions in the quarter including Box, The National Health Service in the U.K., and one of Japan’s largest auto manufacturers bolstering its use of the Splunk Enterprise platform to boost efficiency by over 90% in problem detection and impact investigation to minutes from hours. He noted that cloud represents 62% of total bookings, up from 50% in fiscal 2021 and 35% in fiscal 2020. Nearly all new cloud revenues were based on workload pricing. The Company expects cloud bookings to grow to 70% for fiscal full year 2023. 

SPLK Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for SPLK stock. The weekly rifle chart bottomed near the $106.49 Fibonacci (fib) level before triggering a as the weekly market structure low (MSL) buy triggers on the breakout above $116.82. The weekly rifle chart uptrend has a rising 5-period moving average (MA) at $128.64 followed by the 15-period MA at $119.98. Shares squeezed through both the weekly 50-period MA at $133.71 and 200-period MA at $133.71. The weekly upper Bollinger Bands (BBs) sit at $156.66. The weekly stochastic formed a mini pup oscillation approaching the 80-band. The daily rifle chart uptrend broke through the daily 200-period MA at $135.52 as the 5-period MA support rises to $136.65 followed by the 15-period MA at $126.85 with upper BBs at $147.80. The daily stochastic is grinded up through the 90-band overbought level. The daily 50-period MA is lagging at $121.14 and daily lower BBs sit at $101.72. It’s important not to chase entries but wait for opportunistic pullbacks at the $135.37 fib, $130.23 fib, $123.30 fib, $116.36 fib/weekly MSL trigger, $112.01, $109.51, and the $106.49 fib level. Upside trajectories range from the $152.68 fib level up towards the $177.00 fib level.