Shares of Splunk Inc
BMO Capital Markets On Splunk
Analyst Keith Bachman downgraded the rating from Outperform to Market Perform, while raising the price target from $127 to $157.
The Cisco System deal presents an enterprise value of around $28 billion, Bachman said in the downgrade note. "We think that this deal is reasonable and that there will not be another buyer," he added.
"The deal is expected to close by the third quarter of Calendar Year 2024," the analyst stated.
KeyBanc Capital Markets On Splunk
Analyst Michael Turits downgraded the rating from Overweight to Sector Weight.
There have been concerns around Splunk's long-term strategic positioning in SIEM (Security Information and Event Management), "given increased competition, potential commoditization of the data layer following announcements like Snowflake Cybersecurity workload and AWS Security Data Lake, and often times negative customer perception on the cost/benefit of traditional SIEM solutions," Turits said in his downgrade note.
While there is "near-term integration risk with overlapping observability capabilities of Cisco's AppDynamics & Thousandeyes with Splunk's observability suite," the deal represents a positive strategic outcome for Splunk, in view of "a mix of short-term opportunity we saw for Splunk given its hybrid on prem/cloud enterprise base in an uncertain macro," he added.
Needham On Splunk
Analyst Mike Cikos downgraded the rating from Buy to Hold.
The Cisco deal represents a 31% premium to Splunk's closing price on Wednesday, Cikos said in a note.
"Feedback from investors has been a state of surprise," the analyst wrote. "Despite the long lead-time (the deal is expected to close 3QCY24), we do not expect regulatory hurdles (e.g. China exposure) to prevent the deal from passing," he added.
Truist Securities On Splunk
Analyst Joel Fishbein maintained an Overweight rating, while raising the price target from $130 to $157.
Cisco's deal seems to be "a highly positive outcome for Splunk shareholders, following years of ongoing transition for the company," Fishbein said.
"From Cisco's financial perspective, they are getting a business that will have scaled to over $4B in ARR by the time of closing with significant FCF profitability," the analyst wrote. With the acquisition, Cisco would be adding "a large, sticky customer base to cross-sell their products into with inroads to a number of fast-growing markets including security, observability and AI," he further stated.
Mizuho Securities On Splunk
Analyst Gregg Moskowitz reiterated a Neutral rating, while lifting the price target from $116 to $157.
"Notwithstanding some product overlap, SPLK plays in large and very competitive markets, and we would anticipate that the deal is likely to close without significant issues (China approval is also not required)," Moskowitz wrote in a note.
Cisco believes Splunk will enable it to offer "more predictive and preventative cybersecurity capabilities as well as a full stack observability portfolio," he added.
Wedbush On Splunk
Analyst Taz Koujalgi reaffirmed a Neutral rating and price target of $105.
The integration of Cisco's newly launched EDR solution with Splunk's SIEM capabilities should improve Cisco's competitive positioning in security, Koujalgi said.
"CSCO had acquired APM vendor AppDynamics in 2017, but has been losing market share to SaaS Observability vendors," the analyst wrote. "Acquiring SPLK could allow CSCO to offer a SaaS Observability offering to AppDynamics customers and its broader installed base," he added.
Guggenheim Securities On Splunk
Analyst John DiFucci maintained a Neutral rating on the stock.
The acquisition has already been unanimously approved by the boards of directors of both Cisco and Splunk, the deal awaits shareholder and regulatory approvals, DiFucci said.
While the deal does represent "some overlap in technology capability in the Observability market," there is less revenue overlap, given Splunk's underperformance in this market, the analyst mentioned. "The strategic combination of Splunk's leading SIEM solution to predict and prevent threats with Cisco's broad security portfolio that focuses on detection and response does make sense to us," he added.
SPLK Price Action: Shares of Splunk were up 0.62% to $145.36 at the time of publication Friday.
