After a management revamp that started a year and a half ago, Splunk seems poised to achieve annual revenue growth in the “mid-teens,” suggests Jefferies.

Brent Thill, a renowned analyst, continues to advocate a buy stance for the software platform, setting a price aim of $140, hinting at a 20% potential growth from the recent closing price. Furthermore, in an optimistic prediction by Jefferies, the stock might even touch $160.

Thill, in his recent commentary, stated, “Splunk is showing promising signs in the vast enterprise segment. With its revamped pricing structure, there’s evident traction, especially in the workload-based pricing observed in the past few months. As Splunk progresses through the final phases of its business model evolution over the upcoming two years, we anticipate a boost in top-tier metrics.”

Splunk embarked on its transformation journey in March 2022 under the leadership of its new CEO, Gary Steele. With a previous stint as the CEO of Proofpoint, a security-as-a-service company, Steele’s induction was pivotal. Past management challenges had obscured the company’s genuine growth and revenue capabilities.

The company initially transitioned to an annual billing approach in 2020, which resulted in a few years of negative free cash flow. Subsequently, they adopted a cloud strategy, causing a dip in operating margins for 2021 and 2022. Thill opines, “With most of these changes behind them and a renewed leadership team at the helm, the company’s financial trajectory is clearer.”

The reinvigorated leadership, a refocused strategy, and the entry of activist investor Starboard Value in October 2022 are all anticipated to uplift investor confidence, as per the analyst. Around the same period, Starboard also invested in cloud software giant Salesforce, playing a crucial role in maintaining financial discipline, optimizing expenses, and ensuring efficient capital use.

Thill concluded by highlighting, “Over the past twelve months, there’s a noticeable pivot at Splunk towards sustainable growth, paired with meticulous expense oversight.”


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