#$splk

This week on the Estimize Roundtable, Estimize’s CEO, Leigh Drogen, and SVP of Media, Christine Short, are joined by guests Jeff Macke of Macke Asset Management and Sean Udall, CIO at Quantum Trading Strategies. Each participant gives their 2 longs and two shorts in the tech space, ahead of a big week for tech earnings. The panel discusses controversial names such as Amazon, Apple, Fitbit, GoPro, and some lesser known companies such as Cray, Splunk and GoGo.

What’s Trending this Morning? $ADSK $TIF $SPLK $SPY $IWM

What’s trending this morning?

ADSK

Reports earnings AMC. I believe this is a little stretched and would likely want to see a pull in. Any more extension would not necessarily be good for the bulls. 

SPLK

This is my favorite looking chart of the 3. I would be long into earnings before I was short. I think this earnings report may be the one to set the precedent for the new trend. Leaning Bullish. 

Here are some of the notable Earnings this week and the Price Action that has led up to these Earnings. I do not bet on earnings with shares either way, however I believe that one is able to buy options on earnings to minimize risk (as the options are premium paid) when it is appropriate and one feels there is an edge. 

Also this serves as a reminder that is if you are Long or Short these stocks…

Ulta Salon, Cosmetics & Fragrance (ULTA): Ulta is firing on all cylinders. Year to date the stock is up 48% and 68% in the past 12 months. Improved merchandise mix and persistently strong traffic trends can be credited with the recent string of earnings growth. For 8 consecutive quarters Ulta has delivered over 20% gains on both the top and bottom line. Beauty products, like discounters, run counter to typical trends in the retail sector. While many companies blame weak consumer spending for their woes, Ulta could say the opposite. Analysts have been head over heels for this name with many of them recommending a buy rating.

GameStop (GME): Video games are the fastest growing sector in the whole entertainment industry. This trend hasn’t helped Gamestop though. Gamestop’s woes stem from its backwards business model. Consumers, now more than ever, prefer to download games directly from the publisher or purchase them online. Gamestop, on the other hand, generate a majority of its revenue from its stand alone and mall based stores. Clearly this is a problem and investors have been quick to take notice. Shares are down 28% in the past 12 months. Long-term, Gamestop is moving towards expanding its digital, collectibles and technology segment of the business. During the first quarter, the collectibles sales soared 260% to $82.3 million and is expected to reach $1 billion by 2019. Additionally, partnerships with AT&T and Apple are proving to be quite lucrative. Diversifying its product offerings to more than just video games will drive revenue for future quarters.

Splunk (SPLK): Over the past few years, enterprise cloud and data analytics offerings have seen exceptional growth. Splunk has been strengthening its product pipeline to keep pace with this upward momentum. During the first quarter Splunk added more than 450 enterprise customers, expanding relationships with notable companies including Chipotle. This quarter wins include Zillow in early May and Groupon in late July. However, slowing license bookings, increased investment in R&D, and high operating costs are expected to take their toll on tomorrow’s results.

Brocade Communications (BRCD): Brocade Communications was consistently beating on the top and bottom line, up until last quarter. During its fiscal third quarter revenue missed the Estimize consensus by nearly $10 million and earnings dropped 33% from a year earlier. Expectations are that we will see another earnings decline on a year over year basis with flat revenue sequentially. Shares are down 3% from a year earlier but have since rebounded in 2016. The acquisition of Ruckus Wireless in April adds a new layer of growth that may push sales higher than consensus forecasts.

Autodesk (ADSK): Financial performance has steadily declined the past two years. The company is now approaching its third quarter of expected profit losses. Revenue has been just as bad with current sales targets 16% lower than a year earlier. Increased investments in cloud based infrastructure and marketing initiatives are to blame for the dwindling cash position. Meanwhile, competition in the space from heavy hitters like Amazon and Microsoft has inhibited revenue growth. Autodesk is seeing decent growth in new subscriptions but because revenue is deferred it won’t likely impact this quarter's results.

Splunk Inc. (SPLK) Information Technology - Software | Reports May 26, After Market Closes

Key Takeaways

The Estimize consensus is calling for flat profits on $178.97 million in revenue, 2 cents higher than Wall Street on the bottom and $4 million on the top

Splunk has gained traction in the enterprise space specifically with its advanced security solutions

Despite robust growth, the company must compete in a heavily concentrated industry against companies like Amazon, IBM and Microsoft

What are you expecting for SPLK? Get your estimate in here!

Enterprise technology has been one of the more volatile stocks in the market recently. Despite robust year over year growth, many of these companies have gotten stuck in the market malaise. This had largely been the case for Splunk but recently they have started to buck the trend. In the past 3 months shares are up nearly 50% with earnings still going strong. Investor’s hope Splunk can continue this upward momentum when it reports Q1 results tomorrow afternoon.

The Estimize consensus is calling for flat profits on $178.97 million in revenue, 2 cents higher than Wall Street on the bottom and $4 million on the top. Compared to a year earlier this represents a 105% increase in earnings with sales expected to grow as much as 42%. Since its last report, per share estimates have increased nearly 100%, reflecting analyst’s positive sentiment towards Splunk. Splunk’s industry lead as a real time operational intelligence and analytics platform should bode well. As the analytics market continues to gain strength, especially in the enterprise space, Splunk has no doubt benefitted, becoming especially popular within financial services as the company offers advanced security analytics data. Splunk has been expanding these cybersecurity offerings, acquiring two companies in the industry, Caspida and Metaphor Software, last year.

Meanwhile, Splunk has signed more than 600 new customers in the fourth quarter and ended the year with more than 11,000 customers worldwide. Some of its most notable customers include Bloomberg, Expedia and Nasdaq, to name a few. The company has quickly attracted new clients through frequent updates of its current platform and strategic partnerships. Last quarter Splunk release new versions of products that partner with notable tech giants in Amazon, Cisco, and Verizon.

Despite the upward trajectory, Splunk has some stiff competition. The company’s rival, ELK Stack, an open source stack company, has been gaining massive global traction and is starting to become a threat. Even bigger players such as Amazon, IBM and Microsoft are fighting for more marketshare. Investments into R&D in order to compete with these players may suppress profitability in the near-term. Do you think SPLK can beat estimates? There is still time to get your estimate in here!