Elastic: The Potential Spring Back Is Getting Very Large

Dec. 20, 2022 3:11 AM ETElastic N.V. (ESTC)21 Comments
Bert Hochfeld profile picture
Bert Hochfeld
21.12K Followers

Summary

  • Elastic's latest reported quarter, in which guidance for the balance of its fiscal year was reduced, albeit marginally, precipitated another fall in the shares.
  • The company announced a layoff, and forecast that it would achieve at least 10% non-GAAP operating margins in its FY '24 year - starts 5/1/23.
  • Some investors/analysts are concerned that companies whose revenue models are based on consumption, as is the case for Elastic, will face headwinds not baked into guidance.
  • That said, other software companies with consumption models have not seen data ingestion fall off a cliff.
  • The company is able to offer users the ability to significantly consolidate vendors, with offerings in search, observability and cyber-security.

Resilience measuring device with arrow and scale.

Evgeny Gromov/iStock via Getty Images

Why consider Elastic shares now?

It has been more than a year now since high growth IT shares reached their recent peak. Since that time, valuations have crashed, and growth expectations have moderated…but long term growth estimates

This article was written by

Bert Hochfeld profile picture
21.12K Followers
Bert Hochfeld graduated with a degree in economics from the University of Pennsylvania and received an MBA from Harvard. Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. Starting in the 1990s, Mr. Hochfeld worked as a sell-side analyst and won awards from the Wall Street Journal for his coverage of the software space. In 2001, Mr. Hochfeld formed his own independent research company, Hochfeld Independent Research Group, which provided research services to major institutions including Fidelity, Columbia Asset, SAC Capital, and many other prominent institutions and hedge funds. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. Hedge Fund Research, an independent 3rd party firm that specializes in ranking managers, rated the Hepplewhite Fund as the best performing small-cap fund for the 5 years ending in 2011. In 2012, Mr. Hochfeld was convicted of misappropriating funds from a hedge fund he operated. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. Highly esteemed for his investment wisdom accumulated over decades, Mr. Hochfeld ranks in the top 0.1% of Tip Ranks analysts for his selection of information technology stocks and their subsequent successes.

Disclosure: I/we have a beneficial long position in the shares of ESTC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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