KeyBanc Takes A Look Inside Splunk's Spectacular Q3

Splunk Inc (NASDAQ: SPLK) reported Thursday its third quarter results, which consisted of a better than expected top and bottom-line, encouraging guidance and an upward revision to its full year fiscal 2018 guidance.

The Analyst & Price Target

KeyBanc Capital Markets analyst Rob Owens maintains an Overweight rating on Splunk's stock with a price target raised from $70 to $80.

The Thesis

The majority of Splunk's operating metrics came in higher than expected, including a 34.3 percent revenue growth and 38 percent billings growth -- both of which came in higher by more than six points, Owens said in a note. Operating margin also outperformed and came in at 9.8 percent, which exceeded the analyst's 8.0 percent estimate and implies a four-point sequential margin expansion.

Splunk's cloud revenue is now closing in on a $100 million revenue run-rate as management continues to add new clients and derive incremental revenue from existing clients, the analyst said. This demonstrates that the company is seeing "meaningful benefit" from increased security awareness, especially during a refresh cycle for the SIEM market.

"We believe Splunk remains a compelling asset, attracting new customers as well as showing potential for expansion within its enterprise customer base, based on both broader deployments and growing use cases," Owens said.

Price Action

Shares of Splunk were trading higher by more than 13 percent Friday at $78.70, which is notably above the stock's 52-week high of $71.46.

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