Providing data analysts powered by artificial intelligence (AI) is the specialty of global big-data firm Splunk (NASDAQ:SPLK). For traders seeking to wager on the expansion of big data in 2020 and beyond, Splunk stock is a go-to pure play in this niche market as there aren’t many publicly traded competitors.
That, then, is the billion-dollar question: Should traders anticipate growth in the data-analytics field? This question will come into focus as Splunk’s Aug. 26 second-quarter earnings announcement draws near.
A game-changing partnership with an extremely famous company could help traders decide whether Splunk is on the right track. With that in mind, unless there’s a terrible earnings miss, the rally in Splunk stock could continue for quite a while longer.
A Closer Look at Splunk Stock
The path to $200 was neither fast nor steady for Splunk stock, but in hindsight it somehow seems as if it was inevitable. Throughout the years, the price action has been characterized by deep dips and roaring rips. Yet, the bulls have always prevailed sooner or later.
In the middle of February of this year, it felt like Splunk stock was on track to break through the psychologically significant $200 resistance level. Indeed, by Feb. 19 the shares were trading at $174 and trending upwards, or so it seemed at the time.
Then came the onset of the novel coronavirus, which upended the global economy and markets. By mid-March, Splunk stock bottomed out at its 52-week low of $93.92.
Next came the bounce-back, which some commentators might say is still in progress. The current 52-week high, marked on Aug. 5, stands at $217.36. The Splunk share price has backed off of that number recently, but that’s not necessarily a bad thing.
If anything, the slight retracement could be an opportunity for dip buyers to take a position in anticipation of the bull run’s continuation.
Big Data Gets Bigger
If you’re concerned about a slowdown in the expansion rate of the data analytics market, that’s understandable. By 2018, the global big data and business analytics market had already reached a jaw-dropping $171.39 billion. Could it possibly get much bigger than that?
It certainly could, and there’s no need to worry about the big data market contracting or even taking a breather. If you can believe it, this market is projected to reach an eye-popping $512.04 billion by the year 2026.
Moreover, between 2019 and 2026 the worldwide big data and business analytics market is forecast to expand at a compound annual growth rate (CAGR) of 14.80%. Even among tech niches, that’s quite impressive and it’s massively bullish for Ericsson stock holders.
The Go-To for Data Analytics
Much of this growth will be driven by an increase in the use of AI in data analytics. AI has the potential to aggregate, analyze and summarize data quickly and accurately. Splunk is well regarded as an early and aggressive adopter of AI-powered analytics.
As I already suggested, Splunk is the right company to invest in because there aren’t many pure-play, publicly tradable alternatives in AI-powered big data.
However, there’s more to Splunk’s bull thesis than a lack of alternatives. There’s also the trust that’s been built, which is crucial in any business enterprise.
Splunk has earned the trust of clients seeking big data solutions throughout multiple industries. As InvestorPlace contributor Matt McCall and the InvestorPlace staff observe, “Domino’s Pizza (NYSE:DPZ) is a Splunk client, as is airplane manufacturer Airbus (OTCMKTS:EADSY) and automaker Porsche (OTCMKTS:POAHY).”
And let’s not forget the announcement that Splunk will provide its analytics functions to none other than Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google Cloud. With a client of that caliber, Splunk is rapidly becoming the go-to provider of AI-enhanced data analytics.
The Bottom Line
There’s no need to fear that the big data revolution will come to a halt anytime in the foreseeable future. With few competitors that specialize in AI-driven data analytics as effectively as Splunk does, investors in Splunk stock can anticipate growth in the niche as well as in the share price.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.