Splunk’s forward sales multiple is eleven times, according to FactSet, which is not nearly as high as another software vendor in the monitoring market, Datadog.ĭatadog Has a price-to-sales multiple of forty-three times next year’s revenue. Regarding Splunk’s big flame-out earlier this month, when it withdrew its long-term financial targets, Abernathy doesn’t have a lot to say, save to observe that the gigantic plunge in the stock is what happens when stocks are trading at high valuations, and Splunk is one of the names that is trading at historically high multiples, he observes. “We believe Dynatrace and Splunk will continue to become more directly competitive as they both extend their platform functionality into adjacent market segments,” writes Abernathy.
Dynatrace management in September signaled its intention to move further into what it considers an $18 billion market for securing cloud applications. This past October, it added to its capabilities with two smaller acquisitions in that area, companies called Plumbr, based in Estonia, and Rigor of Atlanta.įor the moment, Dynatrace has a “broader and deeper” selection of products in application monitoring than does Splunk, Abernathy believes.ĭynatrace, meanwhile, is moving into Splunk’s security field, writes Abernathy, noting that the company on December 8th introduced its first product for security, something called an application security module. Splunk last year bought a firm that specializes in monitoring the performance of software programs, which is Dynatrace’s bread and butter, called SignalFX, for $1 billion. Spreading its wings brings Splunk into direct competition with Dynatrace.
“As it spreads across more buying centers, Splunk’s recurring revenue per customer increases significantly and, we believe, Splunk also becomes harder to competitively displace.” By way of reference, Splunk has just $2 billion in annual sales.Ībernathy likes the company’s expanding ambition. The total addressable market, according to Abernathy, is $81 billion for Splunk. Its role now includes very broad monitoring of any corporate data, and also constant monitoring of IT operations.
The company’s morphed via a series of sixteen acquisitions in the last seven years. Splunk was traditionally all about security, looking at log files to detect computer break-ins. Rosenblatt Securities analyst Blair Abernathy late Wednesday issued an initiation of coverage note of both stocks, and gave both a Buy rating, and observed that the two companies are increasingly moving into direct competition with one another because they are expanding their product offerings. (Abernathy has a long history at several prominent firms such as Stifel prior to joining Rosenblatt this year.) If you like the thrill of competition, an emerging battle to consider is the face-off between Splunk, the seventeen-year-old vendor of security software, and Dynatrace, the six-year-old vendor of application monitoring software.