Despite its 38% tumble this year, Wolfe Research expects shares of Splunk to rally in the months ahead. Analyst Joshua Tilton initiated coverage of the software company with an outperform rating and $90 price target, saying in a note to clients that shares are trading at attractive levels even as the company faces a weakening spending environment and growing competition. “We think the company’s cult like customer base is stickier than people realize, competition fears are somewhat overdone, that Splunk is still the market leader in SIEM, a foundational aspect of the cybersecurity strategy where we think spending will remain resilient, and that the observability opportunity has legs,” he wrote. Splunk, used as a tool to locate security threats, has seen its shares tumble more than 59% from its 52-week highs as it grapples with a troublesome macro environment, a new CEO and no chief financial officer. Last month, activist investor Starboard Value revealed a growing stake in the software company . “Bottom line, we believe a valuation of 4.5x, a discount to every scenario we just laid out is not aggressive by any means, and with shares already trading below featherweight growth peers we think the risk here is to the upside,” he said. Wolfe Research’s new price target implies a 25% upside for the stock from Friday’s close. — CNBC’s Michael Bloom contributed reporting
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