Jefferies downgraded Splunk (NASDAQ:SPLK) to Hold from Buy on Monday, raising the price target to $157 from $140 per share. In a note on software stocks, the firm also maintained Buy ratings on Snowflake (NYSE:SNOW) and Elastic N.V. (NYSE:ESTC).
The SPLK downgrade is due to the September 21 announcement that the company had agreed to be acquired by CSCO for $157 per share in cash, representing approximately $28 billion in equity value. The deal is expected to close by the end of C3Q24.
On SNOW, the firm said sentiment is constructive after a strong quarter from DDOG and a positive AWS read-through. However, Jefferies analysts note that the "premium valuation of 16x CY24 rev remains the largest pushback."
"We believe the bar heading into F3Q is low as SNOW faces a 16pt easier comp and its lowest ever implied QoQ product growth," said the analysts at the Wall Street firm.
Meanwhile, ESTC is Jefferies' value pick following two straight quarters of "solid execution, accelerating backlog growth and valuation at 5.3x CY24 rev (vs. SPLK/NEWR takeout multiples at 7.1x/5.7x)."
"We believe ESTC is a strategically attractive asset with best-of-breed Search technology that underpins AI workloads," they wrote.