Why Splunk's Shares Gained 24.4% in November

What happened

Shares of Splunk (NASDAQ: SPLK) rose 24.4% in November 2019, according to data from S&P Global Market Intelligence. The surge rested on a strong third-quarter earnings report, which drove the stock price 10.7% higher in a single day.

So what

The provider of data analytics tools and services posted 30% year-over-year revenue growth in the third quarter of fiscal year 2020, landing at $626 million. Adjusted earnings rose 53% to $0.58 per diluted share. Your average analyst would have settled for earnings near $0.54 per share on sales in the vicinity of $605 million.

Rendering of a white charting arrow headed upward.

Image source: Getty Images.

Now what

Splunk is converting its user base from perpetual software licenses to a subscription-based software as a service model. Ninety-two percent of the third-quarter sales were collected as renewable revenues under long-term subscription deals, up from 82% in the year-ago quarter and 47% in fiscal year 2018.

The stock has now gained 46% over the past 52 weeks. Trading at 63 times forward earnings estimates and 10.4 times trailing sales, Splunk isn't a cheap stock as measured by traditional value metrics. But sales are skyrocketing while also becoming more predictable under the renewable contract model, so Splunk is delivering on the promises that have been built into the stock's hefty $22.7 billion market value.

10 stocks we like better than Splunk
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Splunk wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of June 1, 2019


Anders Bylund has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Splunk. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More