To The Moon

$Splunk(SPLK)$ is scheduled to announce its fiscal Q3 2024 earnings results on 28 Nov 2023 after market close.

The consensus EPS Estimate is $1.15 (+38.6% Y/Y) and the consensus Revenue Estimate is $1.03B (+10.8% Y/Y). Over the last 2 years, SPLK has beaten EPS estimates 75% of the time and has beaten revenue estimates 100% of the time.

Data analytics software maker is expected to report a rise in third-quarter revenue, helped by strong demand for the company's cybersecurity software.

Cisco to Acquire Splunk

Splunk, the cybersecurity and observability leader, in September 2023, announced a definitive agreement under which Cisco intends to acquire Splunk for $157 per share in cash, representing approximately $28 billion in equity value.

The deal is estimated to close in Q3 2024. Upon close of the acquisition, Splunk President and CEO Gary Steele will join Cisco's Executive Leadership Team reporting to Chair and CEO Chuck Robbins.

Splunk (SPLK) Last Reported Earnings

SPLK last reported earnings on 23 Aug 2023 have seen its shares gained +12.9% the day following the earnings announcement to close at 112.83.

Following its earnings release, 96 days ago, SPLK stock has drifted +34.4% higher. From the time it announced earnings, SPLK traded in a range between 110.74 and 152.00. The last price (151.59) is closer to the higher end of range.

Splunk (SPLK) Upcoming Earnings Guidance

SPLK has issued earnings guidance for Q3 2024. Revenue estimate in the range of 1.02 B to 1.035 B, which would be a 11% increase from the same period last year. Operating Margin estimate in the range of 24.7% to 25.3%.

Splunk (SPLK) Historical Moves Ahead of Earnings

SPLK historically moved higher heading into earnings more often than not. On average, the stock dropped -1.3% for the 2 week period before earnings (based on the last 12 quarters of data).

Splunk (SPLK) Historical Stock Price Reaction to Earnings

SPLK shares have moved lower in the immediate aftermath of earnings 7 out of 12 previous reports. On average the stock moved up 0.1% in the first day of trading after the company reported earnings.

Splunk (SPLK) Stock Behavior After Earnings

Based on the previous 12 earnings releases, SPLK is more likely to trade higher 1 day after earnings for an average gain of 0.9%

Splunk (SPLK) Post Earnings Announcement Drift

SPLK share price has drifted up 34.4% post earnings announcement. Using the last 12 quarters data, the average drift between earnings announcements is -3.3%. The current drift represents a positive 1.9 standard deviation move.

• Current post earnings announcement drift: 34.4%

• Historical average post earnings announcement drift: -3.3%

• Historical post earnings drift standard deviation move: ±17.9%

Splunk (SPLK) Post Earnings Movement

The options market overestimated SPLK stocks earnings move 58% of the time in the last 12 quarters. The predicted move after earnings announcement was ±9.4% on average vs an average of the actual earnings moves of 8.4% (in absolute terms).

Splunk (SPLK) Earnings Implied Volatility Crush

SPLK's last earnings implied volatility (IV30) going into earnings was 49.7. The last time SPLK released earnings, the implied volatility dropped to 35.0, resulting in an implied volatility crush of 30%. 5 days after earnings, the 30 day IV was 27.3.

• Average Implied Volatility Crush For SPLK Earnings: 24%

• Average 30 Day Implied Volatility 1 Day Before Earnings: 60.4

• Average SPLK 30 Day IV for the Day of Earnings: 45.5

• Average 30 Day Implied Volatility 5 Days After Earnings: 43.0

Splunk (SPLK) Implied Volatility Skew

The implied volatility skew shows the market's bias for pricing in volatility risk to the option premium of downside puts and upside calls.

The implied volatility for downside puts over the last 8 trading days average is decreasing relative to upside calls, this suggests that the market is pricing in a slightly positivity for upside move.

The Current Skew Indicator is showing to be Slightly Bullish

Summary

Based on what we have seen from its past earnings, Splunk should be posting better-than-expected earnings as their sales should be boosted by strong demand for their cybersecurity software. With the impending acquisition deal by Cisco, I would think Splunk is in a good position for more upside.

The implied volatility skew indicate that market has priced in slight bullish upside move. I would expect a small percentage move post earnings for Splunk.

Appreciate if you could share your thoughts in the comment section whether you think Splunk would have a stock price surge or a small percentage move after its earning result.

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.