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Elastic (ESTC)
NYSE:ESTC
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Elastic
(NYSE:ESTC)
71Outperform
Positive Factors
Acquisition
The acquisition of Keep Alerting is adding on to Elastic’s existing AIOps capabilities, making the platform more valuable to site reliability engineers, software engineers, and operations team members.
Financial Performance
Elastic posted its strongest nominal revenue beat in 11-quarters and comfortably topped guidance on the bottom line.
Market Trends
Elastic is well positioned to benefit from growth in observability, participate in the gen AI trend, and expand margins.
Negative Factors
Cost Increases
The increase in cost of subscription revenue year-over-year was primarily due to an increase of $9.5M in cloud infrastructure costs.
Execution Risks
There is a somewhat balanced risk-reward for the stock given execution risks.
Sales Performance
Net new logos were light, with 50 added versus 100-200 over the prior 5 quarters, attributed to a focus on higher propensity spending customers and quality over quantity.
Elastic (ESTC) vs. S&P 500 (SPY)
Market Cap
$9.64B
Dividend YieldN/A
Average Volume (3M)1.86M
Price to Earnings (P/E)192.8
Beta (1Y)1.51
Revenue Growth17.95%
EPS Growth-345.28%
CountryUS
Employees3,403
SectorTechnology
Sector Strength77
IndustrySoftware - Application
Share Statistics
EPS (TTM)0.63
Shares Outstanding104,412,820
10 Day Avg. Volume1,749,796
30 Day Avg. Volume1,862,967
Financial Highlights & Ratios
PEG Ratio0.47
Price to Book (P/B)10.37
Price to Sales (P/S)0.00
P/FCF Ratio39.19
Enterprise Value/Market Cap0.93
Enterprise Value/Revenue1.66
Enterprise Value/Gross Profit8.43
Enterprise Value/Ebitda-37.56
Forecast
1Y Price Target
$129.11Price Target Upside39.90% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering22
Elastic Business Overview & Revenue Model
Company DescriptionElastic N.V., a search company, delivers technology solutions designed to run in public or private clouds in multi-cloud environments. It primarily offers Elastic Stack, a set of software products that ingest and store data from various sources and formats, as well as perform search, analysis, and visualization. The company's Elastic Stack product portfolio comprises Elasticsearch, a distributed, real-time search and analytics engine, and data store for various types of data, including textual, numerical, geospatial, structured, and unstructured; Kibana, a user interface, management, and configuration interface for the Elastic Stack; Beats, a single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash; Elastic Agent that offers integrated host protection and central management services; and Logstash, a data processing pipeline for ingesting data into Elasticsearch or other storage systems. It also provides software solutions on the Elastic Stack that address cases, including app search, workplace search, logging, metrics, application performance management, and synthetic monitoring. The company's platform solutions provide new capabilities that helps users to combine the benefits of the Elastic Stack. The company was incorporated in 2012 and is headquartered in Mountain View, California.
How the Company Makes MoneyElastic generates revenue primarily through the sale of subscriptions for its software and cloud services. The company's revenue model is based on a combination of open-source technology and proprietary features, which are offered through subscription licenses. Elastic offers its products via Elastic Cloud, which is a hosted service, and through on-premise deployments. Key revenue streams include subscription fees for access to advanced features and support, as well as consumption-based pricing for its cloud offerings. Additionally, Elastic has established partnerships with major cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud Platform, which facilitate the distribution and integration of its services and contribute to its revenue growth.
Elastic Key Performance Indicators (KPIs)
Any
Subscription Customers
Monitors the number of customers subscribing to services, reflecting the company’s growth in user base and potential for recurring revenue.
Monitors the number of customers subscribing to services, reflecting the company’s growth in user base and potential for recurring revenue.
Data provided by:
Main Street Data
Main Street DataElastic Financial Statement Overview
Summary
Elastic shows robust revenue growth and cash flow improvement, bolstered by efficient cost management and a solid balance sheet with low leverage. Challenges remain in achieving net profitability and optimizing returns on equity. The company is well-positioned with strong liquidity and cash generation but needs to address profitability issues to enhance financial health further.Income Statement
Elastic has demonstrated strong revenue growth, with a notable increase from $427.6 million in 2020 to $1.43 billion in TTM (Trailing-Twelve-Months). The gross profit margin is high at approximately 74.1%, indicating efficient cost management. However, the company is still facing challenges achieving profitability, as evidenced by negative net profit and EBIT margins, which are areas of concern.75
Positive
Balance Sheet
The company has a solid equity position with a debt-to-equity ratio of about 0.02 in TTM, signaling low leverage. The equity ratio is approximately 36.9%, showcasing a stable capital structure. However, the return on equity is negative due to persistent net losses, which suggests inefficiencies in generating returns on shareholder investments.70
Positive
Cash Flow
Elastic's cash flow has improved significantly, with free cash flow growing to $227.97 million in TTM from a negative position in prior years. The operating cash flow to net income ratio is favorable, indicating efficient cash management despite net losses. The company has successfully converted operating cash flow to free cash flow, showcasing strong cash generation capabilities.78
Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.43B | 1.27B | 1.07B | 862.37M | 608.49M | 427.62M | Gross Profit |
| 1.06B | 937.24M | 772.36M | 630.18M | 447.44M | 304.93M | EBIT |
| -84.05M | -129.90M | -187.88M | -173.68M | -129.48M | -171.10M | EBITDA |
| -29.77M | -78.63M | -171.49M | -157.34M | -63.49M | -156.28M | Net Income Common Stockholders |
| -132.83M | 61.72M | -236.16M | -203.85M | -129.43M | -167.17M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 1.28B | 1.08B | 915.21M | 860.95M | 400.81M | 297.08M | Total Assets |
| 2.33B | 2.24B | 1.74B | 1.64B | 973.17M | 803.91M | Total Debt |
| 587.73M | 593.70M | 594.23M | 594.22M | 28.18M | 35.47M | Net Debt |
| 3.72M | 53.30M | -49.93M | -266.73M | -372.64M | -261.62M | Total Liabilities |
| 1.47B | 1.50B | 1.34B | 1.23B | 522.34M | 390.26M | Stockholders Equity |
| 859.11M | 738.18M | 398.90M | 415.43M | 450.83M | 413.65M |
| Cash Flow | Free Cash Flow | ||||
| 227.97M | 145.31M | 32.98M | -1.75M | 18.32M | -35.63M | Operating Cash Flow |
| 231.04M | 148.76M | 35.66M | 5.67M | 22.55M | -30.56M | Investing Cash Flow |
| -206.37M | -287.96M | -272.95M | -127.27M | -1.52M | -29.19M | Financing Cash Flow |
| 39.03M | 40.05M | 17.47M | 602.13M | 77.26M | 58.54M |
Elastic Technical Analysis
Neutral
92.29
Price Trends
87.54
Positive
96.86
Negative
93.92
Negative
Market Momentum
1.82
Negative
60.84
Neutral
80.36
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESTC, the sentiment is Neutral. The current price of 92.29 is above the 20-day moving average (MA) of 86.25, above the 50-day MA of 87.54, and below the 200-day MA of 93.92, indicating a neutral trend. The MACD of 1.82 indicates Negative momentum. The RSI at 60.84 is Neutral, neither overbought nor oversold. The STOCH value of 80.36 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ESTC.
Elastic Risk Analysis
Elastic disclosed 75 risk factors in its most recent earnings report. Elastic reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Elastic Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $6.75B | 14.31 | 58.14% | ― | 23.21% | ― | |
71 Outperform | $9.64B | 192.75 | -16.95% | ― | 17.95% | -345.28% | |
70 Neutral | $4.57B | ― | -6.85% | ― | 20.46% | 39.37% | |
66 Neutral | $4.72B | ― | -4.16% | ― | 17.70% | 61.98% | |
66 Neutral | $8.09B | ― | -0.20% | ― | 30.93% | 99.45% | |
60 Neutral | $11.58B | 10.33 | -7.23% | 2.94% | 7.47% | -10.84% | |
57 Neutral | $7.67B | ― | -34.18% | ― | 24.11% | 21.87% |
* Technology Sector Average
Performance Comparison
ESTC
Elastic
92.29
-18.37
-16.60%
CFLT
Confluent
21.89
-10.13
-31.64%
INTA
Intapp
57.27
20.41
55.37%
FRSH
Freshworks
14.85
0.71
5.02%
CWAN
Clearwater Analytics Holdings
23.52
4.21
21.80%
GTLB
Gitlab
48.95
-9.57
-16.35%
Elastic Earnings Call Summary
Earnings Call Date:Feb 27, 2025
(Q3-2025)
| % Change Since: -8.88%|
Next Earnings Date:May 29, 2025
Earnings Call Sentiment Positive
The earnings call reflected a strong quarter with notable revenue growth, increased high-value customer base, and momentum in generative AI applications. Although earlier sales execution issues and flat SMB growth posed challenges, the overall performance and strategic product innovations indicate a positive outlook.Q3-2025 Updates
Positive Updates
Strong Revenue Growth
Total revenue for the third quarter grew 17% year-over-year with cloud revenue growing 26% year-over-year, showing strong sales execution and market demand.
Increased High-Value Customer Base
The number of customers spending over $100,000 increased to over 1,460, and more customers spending over $1 million were added through the first three quarters compared to all of last year.
Generative AI Momentum
Five deals over $1 million were signed for Gen AI applications, with over 1,750 Elastic Cloud customers using Gen AI cases, including 270 spending over $100,000 annually.
Successful Product Innovations
Product innovations like Elastic Cloud Serverless and logsdb Index Mode were highlighted as key differentiators driving customer adoption and competitive wins.
Improved Financial Metrics
Non-GAAP operating margin was 16.8%, better than expected, driven by strong revenue outperformance and spending discipline.
Positive Cash Flow
Adjusted free cash flow was approximately $99 million, translating to a 26% adjusted free cash flow margin.
Negative Updates
Initial Sales Execution Issues
Field segmentation changes at the start of the fiscal year resulted in unanticipated sales execution issues, although these have since been addressed.
Flat SMB Self-Service Cloud Motion
Revenue from the Elastic Cloud month-to-month motion, driven mainly by self-service SMB customers, remained flat, impacting overall growth potential.
Q4 Revenue Headwinds
A sequential headwind of roughly $10 million to revenue in Q4 due to having three fewer days compared to the first three quarters, along with a $1 million to $2 million headwind from the recent strength in the US dollar.
Company Guidance
During the Elastic Third Quarter Fiscal 2025 Earnings Results Call, Elastic reported strong financial performance, surpassing guidance metrics with a 17% year-over-year revenue growth and a 26% increase in cloud revenue. The non-GAAP operating margin was 17% of revenue, with notable expansion in customers spending over $100,000 annually, now totaling over 1,460. The company highlighted the impact of generative AI, which contributed to five deals exceeding $1 million in annual contract value. Elastic's efforts in the Gen AI domain resulted in over 1,750 Elastic Cloud customers using its platform for Gen AI use cases, with more than 270 of these customers spending over $100,000 annually. The company also announced the appointment of Navam Welihinda as the new CFO, effective February 28, 2025, and provided guidance for the fourth quarter, projecting total revenue between $379 million and $381 million, with a 13.5% non-GAAP operating margin.Elastic Corporate Events
Executive/Board ChangesBusiness Operations and StrategyFinancial Disclosures
Elastic Appoints Navam Welihinda as New CFO
Positive
Feb 27, 2025
Elastic announced the appointment of Navam Welihinda as its new Chief Financial Officer, effective February 28, 2025, succeeding Eric Prengel. Welihinda, with a background at Grammarly and HashiCorp, is expected to lead Elastic’s finance function and contribute to its growth. In its third quarter of fiscal 2025, Elastic reported a 17% year-over-year increase in total revenue to $382 million and a 26% increase in Elastic Cloud revenue to $180 million, reflecting strong sales execution and market demand. The company also highlighted significant product innovations and received recognition as the AWS Global Generative AI Infrastructure and Data Partner of the Year 2024.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.