Given the vast quantities of data that businesses rely on today, there’s a fast-growing niche which I believe will be explosive in the coming decade, and that’s data management and analytics. One simple way to position yourself for the inevitable expansion for this market is with a long position in Splunk (NASDAQ:SPLK) stock.
This is not the only company operating in the space, but I expect its spirit of innovation to drive gains in the Splunk stock price in 2020 and for at least ten years after that.
Don’t be put off by the company’s funny name; this company is all business, and SPLK stock shares could appreciate in value over time.
SPLK Stock Is Driven by the Power of Data
I always make it a habit to listen to the founder, CEO, and/or president of a company before recommending it; this is a crucial step in evaluating the health of a prospective investment. In the case of Splunk, I recently viewed a video interview of CEO Doug Merritt and found his enthusiasm to be quite infectious.
More importantly, however, Merritt truly understands and believes in the future of data management and its power to solve many of the world’s problems. In particular, Merritt explained the rationale for his company’s establishment of two venture capital funds known as the Innovation Fund and the Social Impact Fund.
Rather than attempt to explain these potentially transformative funds myself, I’ll let the Splunk CEO do the talking:
These two funds are purposely constructed to help invest in companies that have more of a commercial purpose in using data to solve issues around the world, from health care to consumer issues to privacy issues… Really doing amazing societal good, using data as a backbone.
I like the sound of that, as I generally prefer to recommend stocks that you can feel good about investing in. And it’s evident that Splunk is taking these venture-capital funds seriously, as the company is investing $100 million into the Innovation Fund and an additional $50 million into the Social Impact Fund.
As stated on the company’s website, the Innovation Fund will be focused on “accelerating growth of companies that are helping transform data into business value” while the Social Impact Fund will concentrate on “accelerating growth of companies that are using data to drive positive social impact, workforce development, equality and sustainability.” These are both impactful areas which, I feel, will add value not only to the SPLK stock price but also to the data analytics field as a whole.
Better Data, Better Business
Through my exploration into the field, I’ve only reaffirmed my prediction that data analytics will acquire greater significance — and profitability — in the coming decade. As explained by the University of Arkansas’ Varun Grover, the University of Cincinnati’s Roger Chiang, the University of Maryland’s Dongsong Zhang, and Ting-Peng Liang, firms can leverage the insights gained from data analytics in a number of areas:
… to increase product/service differentiation, adjust the price of products/services, and develop innovative products and services… improve customer satisfaction and loyalty, lock in customers and suppliers, and create a niche market… [and] develop a dynamic organizational structure to respond to market and environmental changes, make better capacity utilization, and increase return on assets.
That’s ambitious, sure, but I’m convinced that Splunk is pushing the envelope and will continue to empower businesses to improve how they collect, analyze, and deploy massive amounts of data. The result, hopefully, will be a more streamlined and effective business model, improved customer satisfaction, and ultimately an enhanced bottom line.
The Takeaway on Splunk Stock
Not every stock analysis is about price action or crunching numbers from the latest earnings report. In the case of SPLK stock, as far as I’m concerned, it’s about vision: taking a bold position today in anticipation of niche-market expansion in the coming years. Yes, it’s a bit risky, and Splunk stock could take a while to appreciate in value, but given the potential of data analytics to change the world, I’d rather get in early than miss out on the revolution.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
