My friend Jonas Lamis, who is the CEO of Sensai, a big data software company that helps other companies find insights in unusual data sets, hit me on Twitter yesterday:
— Jonas Lamis (@jonaslamis) May 13, 2015
Obviously this is just one piece of data, with an apparent positive implication for the stock, but it got me looking at the stock. Splunk is an enterprise software vendor whose products analyze big data. The company has over 9,000 customers, and while earnings have been hard to come by, sales are growing 30% a year and are expected to be $600 million in the current fiscal year. At 15x expected sales, the stock is far from cheap. But the words big data are worth a few multiple points along 🙂
If you think the stock is expensive on most valuation metrics, its important to note that while the stock is up 20% in 2015, it is still down 33% from its all time highs made in early 2014 when it appeared to be an all out mania.
On a one year basis, the stock has held its uptrend since the 52 week lows, and is now threatening a breakout above key technical resistance at $70:
Splunk does not report fiscal Q1 results until May 28th, and the May 29th weekly 70 straddle (stock reference $70.30) can be bought for about $6.70. If you bought that today you would need a move above $76.70 or below $63.70 to make money, or about 10%. That seems a bit hefty, but the stock has had 4 moves this year inside of a month of at least 15%:
While short dated options prices look expensive, given the stock’s recent movement, and the scheduled event, they could actually be viewed as cheap for those looking to express directional views.
We will be sure to check back in on this one prior to earnings.