Pick up the phone, I’m always home
Call me any time
Just ring 36 24 36 hey
I lead a life of crime
Dirty deeds, done dirt cheap – AC/DC, Dirty deeds, done dirt cheap
Let’s update the analysis on each of the stocks from our Security Basket.
Splunk – I love how Splunk describes its business in its latest 10-K filing with the SEC: “Splunk provides innovative software products that enable organizations to gain real-time operational intelligence by harnessing the value of their data. Our products enable users to collect, index, search, explore, monitor and analyze data regardless of format or source.”
This is a very innovative company that’s helping to create the “Big Data” industry. With the coming explosion in data that will be collected from connected appliances, thermostats, cars, watches, wearables, the Internet of Things, and so on, there’s huge demand for figuring out what to do with and then monetize all that data. Splunk, Tableau Software, and of course, IBM are all in the big data business. (On a side note, I’m currently digging in, analyzing and maybe looking to reverse my long-held bearishness on IBM, in large part because of their potential in the Big Data industry in the next decade.)
Splunk will report earnings in the next week, and I expect they will report very strong topline growth. Analysts are expecting Splunk to report a loss of about 3 cents per share on $118 million in sales, which would be up 37% year over year. I’d be disappointed in anything less than break even on $120 million in sales as the company scrambles to meet demand. I’m not one to gamble on short-term earnings reports very often, but I do expect a pop to new all-time highs if the company reports a strong beat.
I missed the close today as I finished making some calls on this stock, so tomorrow morning, I’ll be adding another tranche of SPLK common stock to my portfolio. To be clear, I’m not looking to flip this stock after the report and indeed, if I’m wrong and the stock takes a hit after the report, I’ll probably be looking to add yet another tranche of common.
F5 – Over the last decade, earnings per share for F5 have gone from being measured in pennies to dimes to dollars. The company looks like it’s in another strong earnings growth cycle. F5’s an app company, as it helps companies’ intranets balance the loads of apps versus web. It’s a security company as it helps companies protect themselves from intruders and hackers as well as to monitor and respond to those intruders and hackers. The company reported another strong quarterly result a few weeks ago and the stock is in a strong up trend reflecting F5’s strong recent earnings and revenue growth. I’ve owned this stock off and on, mostly on, since 2004 or so and if, in the next decade, F5 can grow its earnings just half as much as the 10x growth from the last decade, this stock should be up several-fold from current levels. I’m likely to nibble on some in this name personally, building up the position a little bit more, in coming weeks.
Palo Alto Networks – Every time I hear a big bank or a retailer CEO interviewed, the questions about cyber security and hacking and what are they doing to protect their customers comes up. And every time, the CEO talks about how they are ramping up spending on security. Executives at major banks and retailers are right to be defensive, it’s ridiculous how often our accounts and our money are compromised by nefarious players and how big the stakes are. I personally had to cancel one of my Trading With Cody debit cards recently after finding thousands of dollars in fraudulent purchases on the account. Does anybody here think the banks and retailers are doing enough to protect you from these identity thefts and other frauds? Palo Alto Networks is one of the purest plays on this Revolution Investment industry, and is priced expensively as a result. The company’s expected to analysts’ consensus estimates call for an EPS of $0.20 per share and $223 million in revenue, which would be nearly 50% year over year growth — a high bar for sure. I expect the company can beat that consensus, but it might take 60% growth or more to pop the stock. I’ll personally be looking buy more if the stock gets hit after the report unless there’s something glaringly wrong with the quarter.