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Citi sees Elastic stock gaining momentum with AI-driven growth potential

EditorEmilio Ghigini
Published 28/08/2024, 11:22
ESTC
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On Wednesday, Citi maintained its Buy rating on Elastic NV (NYSE:ESTC) stock, increasing the price target to $160 from $155. The firm anticipates a robust first fiscal quarter for the company, driven by seasonal strength in its cloud business. The revised target reflects a positive outlook for the company's growth, particularly in the area of artificial intelligence (AI).

Elastic NV is expected to report a "healthy beat" and a slight upward revision for the year's forecasts. The company's Elastic Searchable Snapshot (ESRE) product is gaining traction, now boasting over 1,000 AI customers. Industry feedback suggests more AI use cases are moving into production, which could lead to significant increases in consumption.

Citi has made slight upward adjustments to its estimates for Elastic NV, citing foreign exchange fluctuations as one of the reasons. The new price target of $160 reflects the firm's confidence in the company's potential for further growth and market reevaluation.

The potential for Elastic NV to displace competitors, particularly Splunk (NASDAQ:SPLK), is also highlighted as a factor that could contribute to stronger market share gains. Citi's analysis points to the company's Generation AI (GenAI) and ESRE technologies as key drivers for this expected success.

Investors are encouraged to consider Elastic NV as a buying opportunity, with Citi suggesting that the company's innovative AI and ESRE offerings will continue to propel its growth and lead to a re-rating in the market.

In other recent news, Elastic NV has been the subject of significant analyst attention. Rosenblatt Securities maintained a Buy rating on Elastic, expecting a 28% growth in Elastic Cloud for the first quarter of fiscal year 2025 despite recent challenges in enterprise sales cycles.

Similarly, Oppenheimer raised Elastic's target price to $150, reflecting a 17.1% year-over-year increase in revenue expectations. TD Cowen also maintained its Hold rating, anticipating a 29% rise in Cloud growth, while Citi increased the company's price target to $155, highlighting the company's accelerated top-line growth.

Elastic NV has also been making strides in product development with the launch of Elastic Distributions of OpenTelemetry (EDOT), a suite of tools designed to enhance infrastructure and application monitoring. This development is expected to provide users with advanced insights for troubleshooting.

Regarding executive compensation, a review of Elastic's proxy statement has revealed a reduction in the Cloud component of executive bonuses, decreasing from 50% to 30%. This change suggests a possible shift in the company's incentive structure. These are all recent developments that investors may find valuable.

InvestingPro Insights

As Citi maintains its bullish stance on Elastic NV (NYSE:ESTC), insights from InvestingPro reinforce some of the optimism surrounding the company's financial health and growth potential. With a market capitalization of $10.84 billion and a high P/E ratio of 171.83, Elastic NV is trading at a premium, indicative of high investor expectations for future earnings. The company's revenue growth remains robust, with an 18.55% increase over the last twelve months as of Q4 2024. This growth is further exemplified by a 19.67% quarterly revenue growth, signaling strong business momentum.

Two InvestingPro Tips highlight critical aspects of the company's financial status. Elastic NV holds more cash than debt on its balance sheet, providing financial flexibility and reducing risk for investors. Additionally, 11 analysts have revised their earnings upwards for the upcoming period, suggesting that the company's financial performance may outperform current market expectations.

For investors seeking more comprehensive analysis, InvestingPro offers a range of additional tips. Currently, there are 10 more InvestingPro Tips available for Elastic NV, which can be accessed for deeper investment insights. The InvestingPro Fair Value estimate stands at $99.36, which is below the current price, hinting at the market's strong confidence in the company's future performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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