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Splunk Up on Earnings Beat, New Customers: Good Time to Chase it?

Let’s talk about Analog Devices (ADI).

This integrated circuit company has been around for a long time, and recently acquired Hittite Microwave Corporation--an acquisition that I love. I have talked before about the microwave, radio frequency and millimeter wave technology space, that gives them a lot a lot of abilities to go into other areas.

Remember, they already have a great product portfolio. They’ve got data converters, amps and power management that covers all kinds of industries: industrial, aerospace, defense, communication, automotive, energy and health-care areas.

Execution typically has been consistent, and consensus for next year is really starting to edge up.  Wall Street seems to be thinking next year will be really great.  

In the most recent quarter, the management team returned $173 million to shareholders. We’ve talked about buybacks and dividends, that’s what you want. You want a company returning that money back to you in one form or the other.

Now if you look at the chart, it’s not really a pretty chart, I would say it’s a head-and-shoulders formation -- and that’s typically bearish. But, I think the stock is oversold, and I love the action this week. I saw it making this little bit of a turn.

I think this could be the beginning of something that could take it to $60.

Now let’s talk about Splunk (SPLK).

OK, listen. They reported after the bell Thursday, and the stock got a boost -- and I want you to chase it.

The company is focused on application software, specifically application management, big data, cloud, digital intelligence, Internet of Things, IT operations, Microsoft infrastructure, monitoring security and compliance. All those are really hot, sexy areas.

Let’s face it, at one point the stock got ahead of itself.  You compound the fact that it was ahead of itself when it was $106 a share and 93 insider sells for 1.8 million, well that’s why it made a hasty retreat from $106 down to the point where people thought they were going out of business.

But, they are not going out of business. I've felt for a long time now the stock is oversold, but management will have to prove itself over and over again. You don’t sell that much stock at the high and get back respect overnight, but they did a little bit Thursday after the bell. The results beat the Street on the top and bottom line.

Second-quarter revenue was up 52% to $101.5 million. Bass Pro Shops, Chinese University of Hong Kong, Dell, Dropbox and Bank of Portugal. Think about these names and the wide breadth of customers all around the world.

Here’s the kicker, guidance for the current quarter and fiscal full year is much better than the Street expected. And operating margins, the company is going to start having them.

Now technically, the big test comes at $50. Through there, the stock has room to $60 - but I honestly thought the stock could go a whole lot higher. But I will tell you right now, the caveat … this will be a very volatile ride.
 

DISCLOSURES

Analog Devices (ADI)

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CHARLES N N Y N
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Splunk (SPLK)

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CHARLES N N Y N
MATT N N N N
DAVID N N N N
MEAGAN N N N N
HITHA N N N N
TRACY N N N N

 

Making Money with Charles Payne gives viewers an end-of-day wrap and provides an insider’s look at tomorrow’s money makers.