In a report released yesterday, Keith Bachman from BMO Capital maintained a Hold rating on Splunk (SPLK – Research Report), with a price target of $157.00.
Keith Bachman has given his Hold rating due to a combination of factors impacting Splunk’s financial outlook and pending acquisition details. Despite reporting a solid quarter with license revenue growth surpassing expectations, Splunk’s cloud ARR growth did not meet the forecast, leading to a cautious perspective. This is further compounded by the anticipation of Cisco’s planned acquisition of Splunk at $157 per share, which is expected to close in the next fiscal year. The deal’s valuation seems reasonable to Bachman, and he does not foresee any competing offers that could disrupt it. However, the closing of this acquisition is a significant factor that contributes to the current Hold rating.
Bachman’s analysis suggests that the proposed acquisition by Cisco at an enterprise value of $30 billion offers a fair multiple considering future free cash flow and revenue growth estimates. The transaction multiples and the lack of an alternative buyer underpin the rationale for the Hold rating. Moreover, Bachman’s projections for Splunk’s financial performance, including revenue, operating margin, and free cash flow margin, have been adjusted upward. Yet, the impending acquisition and its associated uncertainties, including a significant termination fee, dictate a cautious approach, thereby justifying the Market Perform rating and a price target of $157. Bachman’s position remains conservative until the transaction is finalized and the market volatility aligns with the stock’s valuation.
Bachman covers the Technology sector, focusing on stocks such as Salesforce, Datadog, and Adobe. According to TipRanks, Bachman has an average return of 11.7% and a 58.82% success rate on recommended stocks.
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Splunk (SPLK) Company Description:
Splunk Inc.engages in developing and marketing software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. Its offerings enable users to monitor, investigate, analyze and act on data, irrespective of format or source, thereby helping them in operational decision making.
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