Elastic Earnings: Broad-based Strength Marks a Strong Period as Macro Conditions Look to Improve

We are raising our fair value estimate for narrow-moat Elastic to $85 from $67 based on strong quarterly results that were ahead of our expectations, and on a moderate increase in our long-term sales assumptions. Along with robust sales and profitability numbers in the quarter, we were encouraged by comments about improved customer buying trends as they ease their budget optimization plans. This trend is in line with commentary from other vendors across the software and security space and points to a gradually improving macroenvironment. With Elastic’s shares trading up sharply after the earnings report, we view Elastic as fairly valued relative to our updated valuation.