Splunk falls as UBS downgrades, citing concerns over increased competition and pricing

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Splunk (NASDAQ: SPLK) shares fell on Thursday as UBS downgraded the data software company, noting concerns about increased competition and the prices of its products.

Analyst Karl Keirstead downgraded his rating on Splunk (SPLK) shares to neutral from buy and lowered the price target to $86 from $125, suggesting Splunk’s root cause (SPLK) the reduction in guidance for 2023 was not “macro” issues as the company claimed, but increased competition, the pricing of its products, and the maturity of its security information and event management opportunities .

Keirstead noted that increased competition has been on investors’ minds for some time, but it’s now more evident as Fortune 500 clients “begin to hesitate and delay expansion decisions as they assess market developments, which impacts demand for Splunk Cloud”.

Shares of Splunk (SPLK) fell more than 4% to $79.90 in premarket trading.

The analyst lowered his 2024 estimates for overall revenue, annual recurring revenue and operating cash flow, but added he was not convinced the consensus estimates were “de-risked enough”.

Keirstead also noted that there’s an element of Splunk’s (SPLK) history that revolves around its new chief executive, Gary Steele, who was named head of the company in April. However, it seems that any change in the company’s end markets can compensate for progress in internal execution.

Finally, the involvement of private equity firms Silver Lake and Hellman & Friedman is “obviously a good thing for investors,” Keirstead added, but it may prevent them from taking Splunk (SPLK) private, as evidenced by the recent deal. status quo with Hellman & Fridmann.

On Wednesday, Splunk (SPLK) filed a lawsuit against Cribl in the US District Court in Delaware, alleging patent and copyright infringement as well as unfair competition.

Analysts are largely bullish on Splunk (SPLK). He has a TO BUY note from the authors of Seeking Alpha, while Wall Street analysts give it a TO BUY. Conversely, Seeking Alpha’s quantitative system, which consistently beats the market, assigns SPLK a HOLD.

Martin E. Berry