Morgan Stanley analyst Keith Weiss upgraded Splunk (SPLK) to Overweight from Equal Weight with a price target of $169, up from $140.

The stock closed Friday up $2.21 to $119.20.

Once Splunk is through its shift to a 100% recurring revenue model and annual invoicing, investors will have better visibility into a company well-positioned for key secular trends in data and monitoring, Weiss tells investors in a research note. He believes Splunk can sustain 25%-plus software annual recurring revenue growth, with free cash flow margins in the mid-20s, yielding $6 in free cash flow per share.

Meanwhile, Splunk shares currently trade at a 30% valuation discount relative to peers on an enterprise value to 2020 sales basis, adds Weiss. As such, he believes the stock looks undervalued at current levels.