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Splunk (NASDAQ:SPLK) shares fell on Thursday as UBS downgraded the data software company, noting concerns over increased competition and pricing of its products.
Analyst Karl Keirstead lowered his rating on Splunk (SPLK) shares to neutral from buy and lowered the price target to $86 from $125, suggesting the root cause of Splunk’s (SPLK) guidance cut for 2023 was not “macro” issues as the company claimed, but increased competition, pricing of its products and maturity of its security information and event management opportunity.
Keirstead noted that increased competition has been a concern of investors for some time, but it is now more apparent as Fortune 500 customers are “beginning to hesitate and delay expansion decisions as they evaluate the evolving market, impacting Splunk Cloud demand.”
Splunk (SPLK) shares declined 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 that he is not convinced that consensus estimates are “sufficiently de-risked.”
Keirstead also noted that there is an element of Splunk’s (SPLK) story that revolves around its new Chief Executive, Gary Steele, who was named to lead the company in April. However, it looks as if any shifts in the company’s end markets may offset an internal execution progress.
Lastly, the involvement by private equity firms Silver Lake and Hellman & Friedman is “obviously a good thing for investors,” Keirstead added, but it may preclude them from taking Splunk (SPLK) private, as evidenced by the recent standstill agreement with Hellman & Friedman.
On Wednesday, Splunk (SPLK) filed a lawsuit against Cribl in the U.S. District Court of Delaware, alleging patent and copyright infringement as well as unfair competition.
Analysts are largely bullish on Splunk (SPLK). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates SPLK a HOLD.
Image and article originally from seekingalpha.com. Read the original article here.