Splunk Inc. (NASDAQ: SPLK) is scheduled to announce its earnings report for the second quarter ended July 31, 2020, on August 26, 2020, after market close. The company produces software, enabling its users to make informed decisions based on the reports generated by the software using machine-generated data.
In 2019, Splunk Inc. registered a splendid 32.3% year-over-year growth, with revenue of $1,496 billion, as per report from market intelligence firm, International Data Corporation (IDC). The company leads the Information Technology Operations Management (ITOM) software market with a 13% market share, followed by Microsoft, IBM & Cisco with 9.7%, 8.4%, and 5.5% market shares, respectively. ITOM's total market was worth $11.5 billion in 2019. Analysts expect the company to maintain its market leadership position in 2020 as well. The company has more than 15,000 clients across 110 countries.
Starting the year at $151.98, its stock has gained roughly 32% YTD, closing on August 20, 2020, at $200.17. In the last 12 months, however, the stock has gained about 56%.
Analysts expect Splunk Inc. to register a quarterly loss of $0.32 per share, which translates to a hefty -206% change against the same quarter last year. On the other hand, the quarterly revenue of the company will rise 0.9% to $521 million compared with the same quarter last year, as per analysts’ forecast. Moreover, analysts estimate that its revenue will grow at 20% per year. For the full year, analysts are predicting $2.44 billion revenue and a loss of $0.34 per share, which represents a 118% reduction in EPS and a 3.3% increase in revenue from the previous year.
Risks
While continuously registering growth in its revenue, the company is not expected to turn profitable until 2024, at least. Moreover, the company has a dangerously high debt-to-equity ratio of 96%. Also, the insiders of the company have been selling a significant number of shares over the past few months.
Conclusion
While being a market leader in 2019 in the ITOM market, the company is not yet profitable and is likely to remain unprofitable until the next two to three years. Revenue, encouragingly, will show an excellent 20% annual growth in the next few years. The company has been innovating its products and has grown its clients across different countries. Despite beating the S&P 500 index and software industry by a good margin in terms of stock returns, caveats like high debt ratio and losses exist for the company.
Zacks, a popular stock research company, ranks the stock at 3, which means hold.
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