Should You Buy Splunk Inc Right Now?

Growth in Big Data and analytics has opened up a huge opportunity for different companies such as Splunk (NASDAQ: SPLK  ) and Tableau Software (NYSE: DATA  ) . Both are growing rapidly, but shares are down 23% and 17%, respectively, in 2014. However, both Splunk and Tableau could be good buys on the pullback, considering their fast-paced growth. Let's examine Splunk and its prospects to see why the company might be a good long-term investment.

Terrific growth and customer wins
In the fourth quarter, Splunk reported total revenue of $99.9 million, up 53% year-over-year. The company's guidance for the current quarter was also quite good. Splunk expects total revenue between $78 million-$80 million, a year-over-year jump of 40%. So, the company has been seeing robust revenue growth so far, and its outlook indicates that it won't be stopping any time soon.

Splunk is penning new deals and signing up more clients at a good pace. This is demonstrated by the fact that Volkswagen's big data lab has chosen it to demonstrate the value of the data that can be analyzed and visualized in real-time from its next generation of electric vehicles. 

There are multiple examples of enterprise adoption in the core markets. Comcast, one of Splunk's longtime customers, expanded its use of Splunk to analyze more than 100 terabytes of data to support the X1 XFINITY platform.

General Electric, another longtime customer, agreed to a multi-year agreement in the fourth quarter. This makes Splunk GE's platform for operational intelligence. GE relies on Splunk primarily for security, but now plans to diversify to multiple applications across a variety of departments. 

On the other hand, Etsy, a marketplace for handmade goods, also signed a multi-year agreement to use Splunk to analyze shopping behavior and customer experience. MLB Advanced Media, the interactive media arm of Major League Baseball, was another big win for Splunk, as it will now tap the technology company to provide IT systems monitoring and customer analytics. 

Product-driven growth
Splunk's expansion from a single product to a multi-product company is giving it new opportunities while increasing customer adoption. The launch of Splunk Enterprise version 6 at a user conference in October is one the major reasons behind the increase in customers.  

Splunk Enterprise is a beta platform that scales to many terabytes. It also has a strong customer base at lower-volume levels. Splunk recently announced new pricing for entry customers that doubles their data volumes at existing price points. As data volumes grow, the company wants to make it easier for customers to start with Splunk and grow going forward.

In the fourth quarter, Splunk had released the ODBC driver, which provides industry-standard connectivity between version 6 and third-party analytics tools, such as Excel and Tableau. This driver enables business users to easily combine machine data with structured data to support business analytics use cases. 

Key partnerships
Given Splunk's robust security offerings, Symantec selected it as the platform for security investigations. Symantec will also use Splunk to ensure compliance with SOCKS and PCI data. This is another notable win for the company because Symantec is a leading player in the cyber security space.

Symantec recently released a report that cites an increase in major data breaches. According to the company, there was a 62% jump in the number of data breaches in 2013 compared to the previous year, leading to the loss of tens of millions of data records. So, the news that Symantec has chosen Splunk as a partner to fight security threats is good news for investors as cyber security is becoming an increasingly important issue. 

In March, Splunk and Tableau entered into a strategic partnership. After this alliance, the latest version of Tableau's software will include Splunk Enterprise as a native data source, using Splunk's recently launched ODBC driver. Tableau is a well-known provider of visual analytics software, and it will now use Splunk's technology to enable users to visualize machine data and find new insights. So, going forward, both companies will be able to deliver a robust suite of services and better tap the data analytics market.

Bottom line
Splunk has lost considerable value this year, but the company's revenue is growing rapidly. Since there is a big opportunity in data analytics, Splunk's solid performance should continue. The company has won over a number of clients and its partnerships are also looking good. Investors would do well to make the most of Splunk's decline this year, as the company looks like a good long-term buy.

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