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Splunk Inc (SPLK): Stay Away From This Technology Stock

Bottom line

It is easy to grow when you are small. As you get bigger, things become increasingly difficult. For example, Salesforce.com’s trailing revenue for the last twelve months was $3.25 billion. The company has delivered a 28% first quarter revenue growth in comparison with the previous year. Splunk’s revenue is not projected to exceed 300 million in the coming year. However, given the current valuation, Splunk would have to grow its revenue for several billion dollars. I think it would be difficult to do this fast. The market has grown slower than 5%. The economic situation is still fragile, and businesses are cautious about their costs. I think that Splunk is overvalued, and the stock would be punished when the investors realize that growth is not as big as they expected.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Salesforce.com.

The article Stay Away From This Technology Stock originally appeared on Fool.com and is written by Vladimir Zernov.

Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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