Don’t Be Fooled by Splunk’s “Weak” New-Year Guidance
Splunk (NASDAQ: SPLK) had a great fiscal 2020 (12 months ended Jan. 31, 2020). Riding the wave of interest in data analytics as organizations around the globe update their operations for the 21st century, the company added hundreds of new customers and made a big $1.05 billion acquisition in cloud computing monitoring outfit SignalFX last August. As a result, sales for the year once again grew north of 30% -- total revenue was up 31% to $2.36 billion, and adjusted earnings per share increased 41% to $1.88.
Perhaps it comes as a surprise, then, that the stock has retreated some 17% since the company released this latest report card. No, coronavirus can't be the sole scapegoat here. As good as the top-line momentum was, it seems that Splunk's own transition to cloud computing-based services is going to cause a hiccup in growth during the first quarter -- to the tune of 6% growth year over year. You read that right, just a single-digit percentage increase. Add in an expected adjusted operating profit margin of negative 25% on revenue of $450 million, and growth seemingly falling off a cliff looks like reason to panic.
But before I convince you to go and sell all of your Splunk stock, let me point out that this situation is likely to be a temporary one. If you originally purchased -- or plan on purchasing -- this stock for the long haul, there's little reason to worry.
Source Fool.com
