Today, a new analysis on the topic of AI.
This time a rather little known stock. The day before yesterday came quarterly figures that convinced, the stock jumped 15%, breaking a 3-year downtrend.
The web version of the article: https://investorsapiens.de/splunk-aktie-prognose-ki-kaufen/
SPLUNK: An AI Infrastructure Company
Foreword
Today we look at a stock that provides AI infrastructure. It is SPLUNK stock, which I discussed in the article. AI Stock Megatrend as a profiteer of the AI megatrend. Yesterday, SPLUNK released its quarterly results and significantly exceeded expectations.
SPLUNK The Company
The story of SPLUNK begins in 2003 when its visionary founders, Erik Swan, Rob Das and Michael Baum, recognized the enormous gap in the way companies use and understand data. They saw that traditional approaches to data analysis could not cope with the growing volumes of data and lacked efficient ways to extract valuable insights from that data. With this insight, they laid the foundation for Splunk and created a platform that enables organizations to efficiently search, analyze and derive key insights from large and complex data sets and Big Data.
By 2007, SPLUNK had raised $40 million from venture capital firms including August Capital, Sevin Rosen, Ignition Partners and JK&B Capital. In 2009, the company became profitable. Fourteen years later, SPLUNK delivers superior quarterly results, well above expectations, and ends the day up 15% while other companies close well in the red.
Splunk is headquartered in San Francisco, California, USA. From there, the company directs its global operations and innovations. With subsidiaries and offices in various countries around the globe, Splunk has established an international presence that allows it to connect with customers worldwide. SPLUNK's workforce currently totals several thousand highly skilled professionals who are passionate about data analytics, AI, and innovation.
SPLUNK specializes in developing software solutions that help companies efficiently process, analyze and interpret data. SPLUNK's platform enables companies to, machine learning and AI algorithms on data to discover patterns, correlations and insights that may have been previously hidden. In doing so, SPLUNK covers a wide range of application areas, from IT security to business analytics to infrastructure monitoring. Of particular note is Splunk's focus on artificial intelligence, which enables organizations to perform advanced analytics and predictions to stay competitive and make informed decisions.
SPLUNK has more than 15,000 customers in over 110 countries, including household names such as Adobe, Bosch, Coca-Cola and Deutsche Bahn.
Numbers, data and facts
SPLUNK AI Profiteer
In the article Megatrend KI Aktien I mentioned the 3 most essential building blocks and components of an AI that essentially make up an AI. These are data that feeds an AI and with which the AI is trained. These are algorithms and methods, machine learning (ML), and the infrastructure components that run an AI. Computing power, chips, GPUs, could computing platforms and so on.
Splunk offers a cloud platform for Big Data machine learning and analytics.
Quarterly figures Q2FY24
Splunk presents excellent quarterly figures and catapults to the top of the cloud providers. After the U.S. close, the company reported adjusted earnings per share of 71 cents. This exceeded Splunk's expectations of 46 cents per share by over 50 percent. Further, the company raised its full-year guidance significantly. The expected profit margin is up from 18% to 18.5% to 21% to 21.5%. That's an increase of more than 16%.
With the strong numbers as well as the raised guidance, the stock is rising and becomes the top pick of AI cloud stocks. While other AI stocks are correcting significantly today (NVIDIA -8%, C3.Ai -13%) Splunk is clearly on top with +15%.
Takeover target
In February 2022, there were various Berichte about Cisco offering over $20 billion to acquire Splunk, according to insider information. At the time, the offer was a significant premium of about 50% to the company's value. Since then, some time has already passed and both Splunk's revenues and profits are growing sustainably.
There is a close relationship between Cisco and Splunk. Partnerschaft. With margins and profits growing strongly, the acquisition is becoming more expensive with each passing day.
42 Analyst opinions on the Splunk share
The current sentiment of analysts as of Aug. 20, 2023 on Consorsbank / FactSets is as follows. Out of 42 total analysts rating:
- 20 buy
- 7 overweight
- 15 hold
- 0 underweight
- 0 sell
The analysts' sentiment is clearly positive. With 27 to 0, buy recommendations clearly predominate.
The price potential for the year is currently seen at $123 at 7.94%. However, this does not yet include the update of the recommendations after the quarterly figures; the first analysts are already raising their forecasts.
Chart analysis
Downward trend since 2020
Splunk stock has been in a downtrend since its 2020 high of over $225, with the general weakness in technology stocks. It lost over 70% of its value in the last 3 years. In October 2022, Splunk stock hit its low of $65 at the Fibonacci retracement 23.6%. The stock began to recover from there, forming a shoulder-head-shoulder reversal formation and breaking the 3-year downtrend with today's 15% gain.
Indicators
The MACD and RSI indicators are positive. In the weekly chart, the indicators signal continued momentum and buying strength.
Breakout from the downward trend
In the daily chart, with a candle duration of 1 day, the RSI indicator is in the overbought zone with a value of 71 after the price jump of 15%, but should cool down within a few days. MACD has generated a positive signal today in the daily chart. If the price does not fall again with the general market weakness in the next few days, the chart situation looks very good and promises further price increases.
Summary
Environment and news
The environment looks positive. With the growth of the AI industry and the generally very good figures of AI companies, the mood is extremely positive. Both NVIDIA and Splunk were able to convince with the presented figures and exceed the expectations of the market. The forecasts for further business are also positive and are being raised.
Possible takeover fantasies by Cisco offer additional potential, but there is nothing new here apart from the reports from 2022, so a takeover by Cisco can be neglected and factored out for the time being. In contrast, the general growth in margins and revenues is sustainable and promising. It can be assumed that Splunk will continue to benefit from the AI megatrend as an AI infrastructure company offering machine learning and cloud platforms.
Analyst Sentiment
Analysts are more unanimous than ever on this stock. There is not a single sell recommendation, 15 analysts recommend holding the share, 27 recommend a buy or overweight. The very good and above expectations quarterly figures have not yet been included in the recommendations.
Chart analysis
The chart analysis also confirms the positive impressions from the figures, the environment and the analysts' opinions. The indicators in both the short-term and longer-term timeframes are positive. After the share slumped by more than 70%, reached the Fibonacci retracement level of 23.6% and broke out of the 3-year downtrend with a completed shoulder-head-shoulder reversal formation, there are also no negative signs from a chart perspective.
Outlook
The outlook from both the positive environment of the fast-growing AI megatrend, growing revenues and margins, reinforced by the fresh quarterly numbers and outlook from management, as well as analyst opinions and the overall chart technical picture are positive.
Risks
Only the speed of the rise of the AI - shares is worrying. Sooner or later, a correction must be expected here, but in the long term I expect further price increases, because AI is a megatrend that will establish itself in all areas of life in the long term.
This is not investment advice and not a recommendation to buy.
