Splunk has been overshadowed by Nvidia. The stock is about to go up.

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It is somewhat convenient

Splunk
‘s

I was overwhelmed by the impressive second quarter earnings and guidance

nvidia
‘s

Explosion results.

Investors did not value Splunk (Ticker: SPLK), a cybersecurity and data analytics software company, as much as they did the chipmaker.

nvidia

(NVDA) this year. Despite unveiling new AI offerings last month, Splunk has seen its shares rise 16% so far this year through Wednesday, while Nvidia stock has more than tripled. the

Standard & Poor’s 500 Index
Meanwhile, it rose by 15%.

Shares of Splunk won’t remain in the dark for much longer — the stock is up 13.5% before Thursday’s open.

Evercore ISI analysts, led by Kirk Mattern, said they expect the stock to rally in the coming months. They have an outperformance rating of Splunk stock with a price target of $125, which is up 25% from Wednesday’s closing price.

“Although Splunk remains off most investors’ radar screens (for now), management continues to deliver more profitable growth, and we believe Splunk remains one of the more idiosyncratic stories in the software heading into the second half of 2023 and 2024,” Matron said. .

He added that the stock could continue to rise after its earnings and again on the newly announced Analysts Day early next year, “as investors return to the name.”

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At the annual user conference in July, the company announced a partnership with

Microsoft

(MSFT) to build Splunk’s enterprise security and monitoring capability offerings on the tech giant’s Azure platform. It also announced new advances in artificial intelligence in its platforms.

KeyBanc analysts reiterated their overrated rating on Splunk stock and increased the price target to $140 from $135. “The company is executing well on its strategy of stabilizing growth in a still challenging environment and expanding free cash flow margins that it stated should be comparable (in the long run) to peers of similar size,” they said.

The company reported adjusted earnings of 71 cents per share in the second quarter, beating analyst expectations of 45 cents per share, according to FactSet data. Revenue jumped 14% to $911 million, beating estimates of $889 million.

Splunk’s guidance for the third quarter came in for revenue of $1.02 billion to $1.035 billion, above Wall Street’s consensus estimate of $982 million.

Write to Callum Keown at callum.keown@barrons.com