Elastic N.V. Stock Forecast

Elastic NV Stock Forecast: There is a staggering amount of information available online, and with such vast data quantities come pros and cons.

On the positive side, it is now possible to research even the most obscure topics from anywhere – at any time. On the negative side, the sheer volume makes it hard to pinpoint the most relevant data. Without specialized training or automated web analysis, it would be near-impossible for an average person to take advantage of the opportunities available on the internet.

Enter search engines, which level the playing field, so that everyone has access to the knowledge stored online. These platforms use advanced software to navigate the web, index trillions of pages, and recommend the most relevant based on a variety of factors – the key words in the search inquiry, the location of the user, and the popularity of pages among other users seeking the same information.

Google is, perhaps, the most popular search engine, but there are plenty of others that use their own formulas to recommend results. Microsoft’s Bing, Altaba’s Yahoo, and China’s Baidu have their own formulas for helping users locate the information they need in a seemingly endless web universe.

What these platforms don’t do – or at least don’t do well – is find details within individual sites. Depending on how the site is set up, major search engines may not be able to see inside them at all. That reduces efficiency for users, who often spend time following internal menus, site maps, and links to locate the facts they need.

The good news is that smart web designers have solved for this problem by adding site-specific search functions. These are developed through the use of software and tools like those offered by Elastic, Datadog, New Relic, and Splunk. Investors and analysts have been watching these companies closely in an effort to predict which has the most opportunity for growth and the highest likelihood of generating value for shareholders.

Elastic, in particular, is getting a lot of attention. In fact, some believe this company will be one of the biggest software companies in the industry before long – but is that optimism justified? In other words, is Elastic stock the right buy in today’s crowded tech marketplace?

Elastic Makes Data Searchable & Visual

At its most basic, Elastic [NYSE: ESTC] offers open source software that makes it possible for users to build their own search tools.

It reviews and analyzes data in all forms, including numerical, textual, geospatial, unstructured, and structured. Elastic’s leading product, Elasticsearch, was released in 2010. It is built on Apache Lucene, and it is best-known for its speed, scalability, distributed nature, and REST APIs.

Elasticsearch forms the foundation of the Elastic Stack, a popular collection of open source tools that users apply in the development of custom solutions for data ingestion, enrichment, analysis, visualization, and storage.

Typically, Elasticsearch is used in conjunction with Logstash and Kibana (ELK Stack), as this combination offers users the opportunity to leverage the power of lightweight shipping agents or “Beats” to send data to Elasticsearch.

In short, Elastic offers users an opportunity to pull data in from any source, regardless of format, and make it available for search, analysis, and visualization.

These tools are most frequently used to design application searches, site searches, and enterprise searches, and they perform functions like logging, measuring against metrics, monitoring application performance, business analytics, and security analytics.

As developers are finding innovative ways to apply these tools, new markets are opening up for Elastic. The fact that it is open source is contributing to the company’s overall success.

Elastic’s leadership has its sights set on becoming one of the biggest software companies in the industry, and many investors have heard that message and gotten on-board. Perhaps they are persuaded by Elastic’s long client list, which is studded with big names like Yale University, E*Trade, Adobe, and Cox Communications.

Does Elastic have what it takes to lead in this competitive field? If so, will the company add value for shareholders as it grows?

Is Elastic N.V. Stock a Buy?

From a numbers perspective, Elastic [NYSE: ESTC] is beating some targets, though it is still operating at a loss.

Earnings for the quarter ended October 2019 were announced on December 4th, and the company demonstrated its ability to deliver more than the market expected.

Total sales for the quarter were $101.1 million, a year-over-year increase of 59 percent, resulting in a Non-GAAP adjusted loss of ($0.22) per share. Much of this revenue came from subscriptions, which is good news for continued results.

Analysts had predicted sales of $96.5 million and a per-share loss of $0.31, so this was a pleasant surprise. However, GAAP loss was quite a bit higher, which may have caused some discomfort among investors. This figure came in at ($0.64) per share, falling short of the expected ($0.49) per share.

Full-year guidance looks promising, with revenues projected at $415 million to $417 million. This represents a year-over-year improvement of 53 percent.

The year’s adjusted loss per share is expected to total between ($1.17) and ($1.24). However, investors with an eye on long-term results see promise in the list of coming product enhancements, new features, and an expanded menu of solutions that should cement Elastic’s position as a market leader.

What are the Risks of Buying Elastic N.V.?

Elastic stock prices dropped nearly 20 percent in December 2019, after the company announced its second-quarter earnings. The biggest concern appears to be the increase in competition in what was already a crowded marketplace.

Rival search solutions are growing at a rapid rate and posting strong results. For example, New Relic is projecting massive new revenue in the next three years, from 2019’s $542.9 million to $1 billion in 2023. Datadog revenue went up by 88 percent in the last quarter, and Splunk revenue is up 30 percent year-over-year.

Elastic [NYSE: ESTC] is working to increase its presence in the endpoint security market, but that doesn’t necessarily add a competitive edge.

There are plenty of strong, established endpoint security companies already, including CrowdStrike, Cisco, Palo Alto Networks, and Check Point Software Technologies. Elastic has a hard road ahead if it plans to take on these industry leaders.

Nonetheless, analysts are still Elastic fans, and most are confident this is the company that will eventually come out on top. In short, Elastic is a smart buy for investors who are willing to wait out some ups and downs.

Elastic N.V. Stock Forecast Summary

Overall, the future looks bright for Elastic, and a majority of analysts have rated this stock a buy.

Price estimates for the next 12 months range from $79 per share to $130 per share, with a median target of $90 per share.

If performance meets these expectations, the increase in value could be between 12.1 percent to 84.4 percent, which makes Elastic a valuable addition to any portfolio.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.