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Elastic Falls 7% Post-Print; Top Analyst Sees Multiple Growth Levers Ahead

support@smarteranalyst.com (Ben Mahaney)
·2-min read

Shares in Elastic NV (ESTC) fell 7% in after-hours trading on Wednesday after the company reported strong fiscal fourth quarter results, but disappointed with weak guidance.

Specifically, Q4 Non-GAAP EPS of -$0.12 beat consensus estimates by $0.19 while GAAP EPS of -$0.38 came in $0.15 above expectations. Revenue of $123.62M surged 53.4% year-over-year thanks to better execution and broad product traction, and beat Street estimates by $6.47M.

However, FY21 guidance was below consensus taking into account expected (not yet witnessed) macro headwinds. Total revenue is expected to be between $530 million and $540 million (vs consensus of $561.3M), with non-GAAP operating margin between -15% and -13%. Non-GAAP net loss per share is now guided at $0.98 and $0.85 (vs. -$1.32 expected).

“We believe it is prudent to expect some near-term business headwinds as the economic impact from the COVID-19 situation further unfolds. As such, our guidance includes the expected impact of COVID‑19 on our business and results of operations based on information available to us today” the company explained.

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Following the report, five-star Oppenheimer analyst Ittai Kidron reiterated his ESTC buy rating while ramping up his price target to a Street-high $95 (6% upside potential).

“Looking closely, while we’re mindful of a potential slowdown, we believe there are plenty of positive points for investors to take note of such as (1) a rebound in activity in April/ May after a brief pause in March; (2) strong customer metrics (>130% expansion) and broad product traction; and (3) improving margins/FCF even with planned investments” Kidron cheered.

Overall, he sees multiple growth levers (upselling, new use cases, customer growth/ expansion) coupled with a conservative view from management- and as a result maintains a positive stance on the shares.

Indeed, all 7 analysts coverings Elastic rating the stock a buy, giving it a Strong Buy consensus. However, shares in Elastic are currently trading up 39% year-to-date, and as a result the average analyst price target of $76 now indicates 14% downside potential. (See ESTC stock analysis on TipRanks).

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