Please ensure Javascript is enabled for purposes of website accessibility

Why Splunk Inc. Stock Dropped 17.4% in October

By Steve Symington - Updated Dec 3, 2018 at 1:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The operational intelligence platform leader plunged along with other high-flying tech stocks last month. Here's what investors need to know.

What happened

Shares of Splunk Inc. (SPLK 3.96%) fell 17.4% in October, according to data from S&P Global Market Intelligence, pulling back along with the broader market despite multiple analyst upgrades.

On the former, note the bulk of Splunk's decline came during the first 10 days of last month, a period when major market indexes plunged from all-time highs, including outsized drops from the tech sector for multiple consecutive sessions.

Stock market data indicating declines.


So what

To be clear, Splunk had no company-specific news that might otherwise merit its decline last month. To the contrary, at least two analysts weighed in with positive notes even as it fell. 

On Oct. 4, 2018, for example, KeyBanc analyst Liz Verity increased her per-share price target by $12 to $132 -- a nearly 40% premium from today's prices -- and reiterated her "outperform" rating on Splunk stock. Verity cited the potential for Splunk to continue gaining customers by expanding use cases for its leading operational intelligence platform.

The following day, BMO Capital's Keith Bachman reaffirmed his own "outperform" rating and $133-per-share price target, echoing the use case argument and noting that double-digit percent growth in attendees of Splunk's latest user conference indicates continued high interest in its products.

Now what

It likely didn't help that Splunk had already soared 40% through the first nine months of 2018, including a more than 30% gain in August following its 26th straight quarterly earnings beat. Of course, Splunk could resume its upward trajectory if it makes it 16 straight with its next (fiscal third-quarter 2019) report later this month. Until then, however, I think long-term investors would do well to remember that Splunk's decline last month had nothing to do with the relative strength of its underlying business.

Editor's note: This article has been corrected to note that Splunk has beaten its quarterly guidance 26 quarters in a row.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Splunk Inc. Stock Quote
Splunk Inc.
$91.96 (3.96%) $3.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.