Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money

79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

FREE EBOOK

How to Day Trade Stocks & Indices

  • Place your first trade
  • Identify 9 chart patterns
  • Pro strategies step-by-step

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy. This form is protected by reCaptcha

Don't miss out

Get our FREE Day Trading guide

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy.

FREE Trading guide

Including Day trading strategy examples

+ Pro-trader interviews

You'll also receive our newsletter and other Opto emails in accordance with our privacy policy.

Earnings

How will Q2 earnings affect Splunk’s share price?

Splunk’s [SPLK] share price took a significant hit earlier this year when it fell to its lowest value since December 2018. The stock dropped almost $20 to $93.92 during intra-day trading on 16 March before closing at $95.71 — marking a 36% fall for the year-to-date.

The slump was in line with the wider coronavirus market downturn. While it took some time, Splunk’s share price has recovered. The stock has rallied 97.99% since a second dip in April.

Since 22 May, Splunk’s share price has continued to trade higher than its February peak, bar one exception when it closed at $173.74 on 11 June.

In fact, Splunk’s share price has recently hit new heights, peaking at $217.36 during intraday trading on 5 August before closing at $217.30. As of 24 August’s close, the stock is up 33% for the year-to-date.

Following its second-quarter earnings report, Splunk’s share price could go either way depending on how the firm’s performance fares against analysts’ expectations.

 

 

When is Splunk reporting Q2 earnings?

26 August

 

Splunk’s earnings history indicates growth

When Splunk released its first-quarter earnings for the fiscal year 2021, it reported a loss of $0.56 per share, which narrowly surpassed the Zacks consensus estimate of a loss of $0.57, marking a 1.75% surprise. Following publication of these results on 21 May, Splunk’s share price enjoyed a jump of almost 13% to close at $184.26 on 22 May.

These results were in stark contrast to the previous quarter, however, when the company reported earnings of $0.96 per share. That said, analysts were expecting the drop and the software company has exceeded consensus earnings estimates three times over the last four consecutive quarters.

For the quarter ended in April 2020, Splunk posted revenue of $434m, which missed the Zacks consensus estimate of $445m by 2.33%. Despite missing estimates, this figure still represents a growth of 2% compared to 2019’s first-quarter revenue of $424m.

Staying positive, Splunk’s CEO Doug Merritt pegged the company’s recent success on the world’s accelerated digitalisation as a result of COVID-19. In a statement released alongside the results, he said: “COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving — we are seeing some resilient customers complete three-to-five-year projects in just months. As customers continue to adapt to this new normal, data matters more than ever, evidenced by our continued strong momentum this quarter.”

“COVID-19 has transformed the world into one that requires rapidly accelerated digital transformation to keep organizations moving — we are seeing some resilient customers complete three-to-five-year projects in just months” - Splunk’s CEO Doug Merritt

 

Looking ahead to its upcoming earnings release, analysts are expecting a further decline, with the consensus estimate projecting the company to post a loss of $0.32 per share, a decline of 206.7% year-on-year.

However, as Q1 results show, this doesn’t necessarily spell disaster for Splunk’s share price. There’s also a positive projection for revenue as analysts expect Splunk to have made $520.95m for the quarter, a 0.9% growth from the same time last year. 

 

What do the analysts think?

In light of the 33% rally Splunk’s share price has enjoyed this year-to-date, expectations for Splunk’s second-quarter earnings "have ramped", according to Brent Thill, Jefferies analyst.  

According to The Fly, Thill thinks management will remain conservative and reiterate the company's fiscal 2022/23 annual recurring revenue growth outlook. Although this could put a short-term "damper on shares," says Thill, he has maintained a Buy rating and raised the firm’s target for Splunk’s share price from $190 to $230.

Splunk has a consensus Hold rating from Zacks Equity Research, which goes against the consensus among 39 analysts polled by CNN Money to Buy the stock. This rating is held by a majority of 29 analysts, with only nine suggesting to Hold the stock, one giving it an Outperform rating and another suggesting to Sell.

The median 12-month price target among 35 analysts polled by CNN Money is $191.40, with a high estimate of $254 and a low of $105. The median price represents a 5.36% decrease from Splunk’s share price as of 24 August’s close.

 

Market Cap$32.128bn
EPS (TTM)-3.16
Operating Margin (TTM)-17.19%
Quarterly Revenue Growth (YoY)2.2%

Splunk share price vitals, Yahoo Finance, 25 August 2020

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Join the 40,000+ subscribers getting market-moving news every week.

Written by

Free ebook

Tricks of the trade: 7 interviews with the world’s top traders

Get it now

Related articles

7 Interviews with the world's best traders

Learn about the techniques and strategies used by expert traders

Get it now