Splunk Dives, Wall Street Analysts Flee After 'Disappointing' Earnings, Outlook

Shares of Splunk (SPLK) are under pressure after the data-analytics company reported a wider than expected third-quarter loss. Following the company's quarterly report, several Wall Street analysts downgraded the stock to Neutral-equivalent ratings, with BTIG analyst Gray Powell calling the results "disappointing" and his peer at Stifel saying that the magnitude of the company's miss is "especially surprising".

RESULTS: After the market close Wednesday, Splunk reported third-quarter losses per share of ($1.26) and revenue $559M, both below consensus of 9c and $613.03M, respectively. The company also said it sees fourth-quarter revenue between $650M-$700M, with consensus at $777.73M, and fourth-quarter adjusted operating margin of (4%)-3%.

"Volatility in the near-term is driving significant variability in our long-term targets. As a result, we are withdrawing our fiscal year 2023 ARR and OCF guidance until we close out this year and have a greater understanding of the macro factors affecting the operating environment," Splunk added.

'DISAPPOINTING' QUARTER: BTIG analyst Gray Powell downgraded Splunk to Neutral from Buy, saying the company's third-quarter results were "disappointing" and its guidance for the fourth quarter was below expectations as the management cited delays in large deal closures at the end of the quarter. Powell added that Splunk's pulled long-term ARR targets calling for 40% average growth through 2024 was also a "big disappointment" following its October analyst day, where the management made those "bullish" medium-term projections.

DA Davidson analyst Andrew Nowinski also downgraded Splunk to Neutral from Buy with a price target of $177, down from $250, after its worse than expected third-quarter results. The analyst noted that the company missed revenue guidance for the third consecutive quarter, and while his checks suggest that demand has improved, the management attributed the miss to seven large deals that slipped out of the third quarter. Nowinski further stated that the lack of visibility implied by Splunk's pulled medium-term guidance warrants a move to the sidelines on Splunk shares.

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