![]() The deal could take a while to be finalized and of course, there's always the risk that this deal could fall through.Ĭisco is not having to take on any debt to finance this deal. The current share price is $152, while the acquisition is coming at $157 per share. That means that investors don't have to stick around to get 3% on their cash here. The expiration of the antitrust period took place a few weeks ago, this means that there's an added chance that this deal will not fall apart due to regulatory matters. Before that, let's discuss the details of the Cisco deal. Fundamentally, I saw that the business had the potential to be a lot more profitable than investors realized, but I'll come to that in a moment. But you should not think about your upside until you've satisfied yourself with your downside on a stock.Īs an inflection investor, I saw that there was a change in the underlying narrative coming from Splunk. You are deploying your hard-earned capital today, so that in the future that capital has as much buying power as it holds today.Īnd only after that, comes your upside potential. You are trying to do only one thing when you are investing, to retain purchasing power. What you are trying to invest in are stocks where there's a mispricing in expectations. What's important in investing is not finding the cheapest stocks or the best company in the world. What you see above is that I wasn't always bullish on Splunk, but I became bullish when I believed the risk-reward was promising. I'm an inflection investor.Īs such, I'm seeking a change in the underlying story, from where investors' expectations are, to where I believe the company is able to move towards.Īccordingly, here's why I argue that Splunk offers investors a good risk-reward and why paying 17x forward free cash flow for Splunk makes it attractive. ![]() My investment thesis has never been about that. In my bullish analysis back in August I said, Here I explain how investors should think about their holding now and why I've turned neutral on Splunk. ( NASDAQ: SPLK) is about to be acquired by Cisco Systems, Inc.
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