Splunk Stock Crash 20% on Surprise Loss, Lower Revenue Outlook

Splunk stock price fell almost 20% in post-market trading as the data analytics software company missed revenue and earnings estimates for the third quarter. Lower than expected outlook for the fourth quarter added to investors’ concerns.

Splunk stock price soared almost 40% year to date before the latest crash. The shares are currently trading at the lowest level in the last six months.

The shares of the data analytics software company have a limited upside because of the soft outlook. On the positive side, Splunk continues generating robust growth in cloud, with cloud ARR jumped 71% year-over-year in the third quarter.

“Our cloud momentum continued in the third quarter, we exceeded our cash flow target significantly and we ended with Cloud ARR up 71% year-over-year — among the highest growth rates in the industry,”

said Jason Child, chief financial officer, Splunk.

Q3 Miss and lower outlook impacted Splunk stock

The data analytics software company missed third-quarter revenue consensus estimates by $57 million while the loss per share of $0.07 also missed the consensus estimate for a profit of $0.15 per share.

The company blamed the challenging market environment and coronavirus pandemic for a larger than expected loss.

“While the environment was a challenge in the quarter, we are enthusiastic about the large and growing opportunity ahead and remain confident in our long-term growth trajectory.”

Splunk expects fourth-quarter revenue in the range of $650 million to $700 million compared to Wall Street’s expectations for $777 million.

The market pundits have also been showing concerns about growth prospects. UBS has recently downgraded Splunk stock ratings from Buy to Sell, with the price target of $165.

UBS analyst Karl Keirstead shows concerns over revenue growth targets amid intense competition. Shares of Splunk are currently trading around $165, with expectations for limited upside. Splunk has hit an all-time high of $223 at the end of September.