Company Reports

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.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

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.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are raising our fair value estimate to $67 from $62 for narrow-moat Elastic after the firm kicked off fiscal 2024 with financial results and guidance ahead of our prior estimates. While macroeconomic pressures persist, management’s commentary indicated a stabilizing demand landscape as customers ease their budget optimization plans. This trend is consistent with customer demand trends seen by other security vendors under our coverage and we believe that the worst of budget optimization impacts are in the rearview mirror for vendors like Elastic. At the same time, despite being gradually improving, macro conditions remain tight and continue to weigh on the firm’s financials including its top-line growth.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are maintaining our $62 fair value estimate for narrow-moat Elastic after the firm reported fiscal fourth-quarter results in line with our estimate for revenue and exceeding our bottom-line estimate. Management's fiscal 2024 first-quarter guidance skewed on the conservative side, as weakness in demand is expected to persist for the first half of the upcoming fiscal year, driven by the challenging macroenvironment. Elastic also recently announced its AI-powered Elasticsearch Relevance Engine, which it believes will be a strong contender for generative artificial intelligence in enterprises. With the shares down 7% after hours, we would recommend investors wait for a more attractive entry point to invest in this Very High Uncertainty-rated company.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are maintaining our $62 fair value estimate for narrow-moat Elastic after the firm reported third-quarter sales largely in line with our estimates. The firm’s bottom-line results exceeded our expectations as the benefits from the layoffs announced by the firm last quarter pushed down operating spending. Despite the improved profitability, we expect continued weakness in demand for the upcoming few quarters as clients continue to rein in certain spending as they optimize costs in a challenging macroeconomic environment. With shares down around 2% afterhours, we would recommend investors seek a larger margin of safety to invest in this Very High Uncertainty-rated company.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's products benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are lowering our fair value estimate for Elastic to $62 from $100 as we rethink the firm’s growth prospects following its decision to lay off 13% of its employees. While management’s goal with the reduction-in-force, or RIF, is to rebalance its investments to focus on areas of growth, we fear that the substantial reduction in personnel may also limit Elastic’s ability to capture new customers. Additionally, we are concerned that, in the near term, Elastic’s clients will rein in certain spending as they optimize costs in a challenging macroeconomic environment. With shares trading around $52 after earnings, we would recommend investors seek a larger margin of safety to invest in the Very High Uncertainty-rated name.

We maintain our fair value estimate of $100 for narrow-moat Elastic after the firm kicked off fiscal 2023 with robust financial results largely in line with our expectations. We continue to have a positive outlook for Elastic as the firm stands to benefit from secular tailwinds across its end-markets.

We are resuming coverage of narrow-moat rated Elastic with a $100 fair value estimate. Shares appear slightly undervalued to us. Our long-term forecasts are unchanged, as we hold our view that the firm is poised for success in the full-stack monitoring, security, and search markets.

We are placing Elastic under review and expect to resume coverage in the near future.

We retain our $100 fair value estimate after Elastic finished fiscal 2022 strongly and set forth robust long-term revenue and profitability targets. We have a positive outlook on the firm as it stands to benefit from secular tailwinds across its end-markets. In our opinion, Elastic’s sticky set of products, a driver behind the firm’s narrow economic moat, would enable the firm to deliver shareholder value over the long term. Recently, the market has dealt overly punitive damage to the valuations of tech companies. As a result, we see Elastic’s shares as trading at an attractive price for investors looking for moaty software-as-a-service exposure.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's products benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

We are initiating coverage of Elastic with a fair value estimate of $100 per share, narrow economic moat rating, positive moat trend rating, and very high uncertainty rating. We currently view the shares as marginally undervalued.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's products benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.