This article is focused on Splunk’s opportunities to return to growth status and to gain or maintain market share. While these days, Splunk’s EV/S ratio has compressed to less than 7X, and its NPV, based on my estimates, is 50% above the current share price, I doubt that those metrics are enough to allow the shares to advance when the rest of the high growth IT group is suffering from sector rotation brought on by a variety of concerns. Splunk shares are unlikely to defy the valuation compression that all higher growth IT names have seen. After falling as low as $110 after reporting quarters reflecting the transition, the shares started to rally and reached $168 just before the rerating of most IT shares began in November of last year. ![]() They hit an all-time high of $220 during the first wave of the recovery from the pandemic induced panic back in August 2020. Splunk shares have seen their share of volatility since the company began its transition to a cloud based revenue model. Why lead an article about Splunk ( NASDAQ: SPLK) with reporting an apogee in negative sentiment? Primarily because investing in Splunk at this point, requires some faith that the AAII sentiment gauge is a contrary indicator and that maximum negative sentiment is usually correlated with positive share price moves over the following 6 and 12 month periods. The latest week's survey is marginally improved, with bullish sentiment up to 19%. The average value for that metric has actually been 38% over the past several years. ![]() The high bearish sentiment metric was reached on February 23, shortly before the market’s 3 week rally. At the moment, the sentiment gauge shows that just 16% of investors are bullish while 48% of investors are bearish. ![]() It was reported a couple of Thursday's past by the American Association of Individual Investors (AAII), that bullish sentiment had reached its lowest point in the past 30 years. PashaIgnatov/iStock via Getty Images Looking at Splunk in the context of the great rerating
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