Splunk soars to all-time high ahead of Q4 earnings

Splunk Inc. (SPLK) stock soared to an all-time of $137.07 on Tuesday ahead of its fourth-quarter earnings on Thursday after the bell. The results will be benefited by the increasing demand for data-driven insights and the rising traction in its cloud business. The machine data specialist would continue to expand its customer base as an increase in orders turned significantly positive for Splunk.

In the bottom line, the company could post a wider loss due to an increase in costs and expenses while the adjusted results could almost double from the previous year quarter. The Internet of Things (IoT) remained the next major happening for Splunk as the company made available Splunk for Industrial during the third quarter.

Analysts expect Splunk to report earnings of $0.76 per share on revenue of $562.52 million for the fourth quarter. In comparison, during the previous year quarter, the company posted a profit of $0.37 per share on revenue of $419.72 million. Majority of the analysts recommended a “strong buy” or “buy” rating on the stock with an average price target of $132.34 per share.

Cloud business is expected to represent a larger share of revenue and growth driver in the future as more companies have started looking into the cloud transition. The company is likely to incur higher costs due to the transformation to a more recurring revenue stream.

The transition to a subscription or renewable model could take time as it witnessed a rise in the number of renewable terms contracts in the third quarter. For the perpetual business, the transition is a headwind as it has shown a rapid decline. This is likely to hurt the bottom line for the fourth quarter.

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For the third quarter, the company posted a wider loss due to higher costs and expenses. Revenues climbed by 40% helped by the rising demand for data-driven insights across all industries. The company said it is making investments in the product and field that could continue to fuel growth.

For the fourth quarter, the company had expected total revenues of about $560 million and adjusted operating margin in the range of 25% to 26%. For the full year 2019, Splunk had predicted total revenues of about $1.74 billion and adjusted operating margin in the range of 11.5% to 12%.

Shares of Splunk opened higher on Tuesday and is trading in the green territory. The stock has risen over 43% in the past year and over 46% in the past three months.

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