Elastic Earnings: Strong Results as Elastic Cloud Continues to Gain Traction

We raise our fair value estimate for narrow-moat Elastic to $92 per share from $85, based both on strong financial results for the third quarter as well as a small increase in our medium-term profitability forecast for the firm. While we continue to be bullish on Elastic’s long-term opportunities, especially as interest in artificial intelligence, or AI, drives demand for its solutions, we remain unable to rationalize the market’s valuation of the company. Even after a sharp drop in its share price after hours and our lift in fair value, we continue to view Elastic as overvalued. For investors looking for high-quality exposure to observability vendors, we’d recommend taking a look at narrow-moat Datadog and Dynatrace, both of whom trade within the 3-star range.