Buy Splunk, Not Saleforce.com

Software as a service (SaaS) aka THE CLOUD is a business model in which software, centrally hosted, is licensed on a subscription basis and is centrally hosted.

And it doesn’t matter what size company you have:

*Start-ups - an idea / viable business model can get up and running quickly with minimal capital and operating cost.
*Small to medium-sized businesses – can take advantage of the scalability in storage and networking capabilities on demand as their business grows.
*Larger business - can help increase operational efficiency, productivity and agility.

CRM market potential is projected to be $82B by 2025 and growing at 12% annually, but Salesforce was an early pioneer of this business model when it migrated its services to the cloud in the early 2000s. The company's founder, Benioff's vision was that software should be delivered 24/7 to people over the cloud. The company grew from $5.9 million in revenue in 2001 to $50.9 million in 2003, then went public in 2004 where the stock increased 55% the first trading day.

Salesforce completed its largest-ever acquisition earlier this year, a data integration platform called MuleSoft for $6.5 billion and in the process, deepened their relationship with Google Cloud. The company's next goal is to doubling their revenue by 2022. It's hard to argue with this goal after seeing what they have done over the past 10 years.

Source

But Salesforce.com is now a $113 billion market cap company. There is still money to be made, but don't expect the same returns due to the laws of big numbers. So another company making noise in the space is Splunk, Inc. and it only has an $18 billion market cap.

Splunk Inc. provides software solutions that enable organizations to gain real-time operational intelligence in the United States and internationally. Its products enable users to collect, index, search, explore, monitor, correlate, and analyze data regardless of format or source and services companies in the education, financial services, government, healthcare/pharmaceuticals, industrials/manufacturing, media/entertainment, retail/ecommerce, technology, and telecommunications industries.

The Internet of Things (IoT) is the network of physical devices, vehicles, home appliances, and other items embedded with electronics, software, sensors, actuators, and connectivity which enables these things to connect and exchange data, creating opportunities for more direct integration of the physical world into computer-based systems, resulting in efficiency improvements, economic benefits, and reduced human exertions.

The number of IoT devices increased 31% year-over-year to 8.4 billion in the year 2017 and it is estimated that there will be 30 billion devices by 2020. The global market value of IoT is projected to reach $7.1 trillion by 2020.

IoT involves extending Internet connectivity beyond standard devices, such as desktops, laptops, smartphones and tablets, to any range of traditionally dumb or non-internet-enabled physical devices and everyday objects. Embedded with technology, these devices can communicate and interact over the Internet, and they can be remotely monitored and controlled.

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Since 2012 revenue has gone from about $100 million a year to $1.27 billion in 2017. Their next revenue goal is $2 billion by 2020. As the internet of things pick up in the coming years, one benefactor will be Splunk, so expect more great things from Splunk in the future.

Splunk's stock price broke out to make new highs recently.

So don't chase price, wait for the pull back to the demand level at $104.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

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Published on

by rollandthomas

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