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On Friday, Cantor Fitzgerald adjusted its outlook on Elastic NV (NYSE:ESTC), reducing the price target from $109.00 to $92.00 while maintaining a Neutral rating. The firm’s analyst, Thomas Blakey, provided insights following Elastic’s recent earnings report, which presented a mixed financial quarter. With annual revenue reaching $1.48 billion and a strong gross margin of 74.39%, Elastic’s revenue exceeded expectations due to strong performance in self-managed solutions, but its cloud revenue fell slightly short. The company also reported robust operating profitability. According to InvestingPro data, 22 analysts have recently revised their earnings estimates upward, suggesting growing confidence in the company’s prospects.
The new Chief Financial Officer, Navam Welihinda, offered his first full-year guidance for Elastic, setting expectations for fiscal year 2026 (F26) revenue 1.6% below the consensus forecast from FactSet, even after considering a one-point foreign exchange benefit. Elastic’s management has observed longer sales cycles in its U.S. Federal business segment but has not seen changes in consumption trends despite the uncertain economic environment. InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.92 and more cash than debt on its balance sheet, providing stability during this transitional period.
Elastic’s guidance for the upcoming fiscal year reflects a cautious stance, taking into account potential extensions of the current deal elongation and macroeconomic impacts seen in its Federal business to the broader business. The company’s first-quarter pipeline appears solid, which provides a high level of confidence, but it anticipates potential impacts on consumption trends from the second to the fourth quarter of the fiscal year.
In response to the guidance and current business conditions, Cantor Fitzgerald has increased its revenue estimates for Elastic’s self-managed segment but lowered expectations for cloud revenue. The firm also projects subscription revenues, excluding month-to-month customers, to grow by 16% year-over-year, a decrease from the 20.5% growth in fiscal year 2025 (F25).
The analyst noted that while there is a greater emphasis on the self-managed business and the firm has adjusted its cloud revenue estimates, there is also heightened competition in the Enterprise Search market. This competitive landscape and the need for clearer revenue outlook in the coming quarters have led to the reiterated Neutral rating. The new price target of $92 is based on a 5 times calendar year 2026 estimated enterprise value to revenue multiple, which is consistent with the firm’s prior valuation multiple. For deeper insights into Elastic’s valuation and competitive position, investors can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, which are available for over 1,400 US stocks.
In other recent news, Elastic N.V. reported fourth-quarter results that exceeded expectations, with adjusted earnings per share of $0.47, surpassing the forecast of $0.37. Revenue rose 16% year-over-year to $388 million, beating the anticipated $380.53 million. Despite these positive results, the company’s fiscal 2026 revenue outlook of $1.655 billion to $1.670 billion fell short of Wall Street’s projection of $1.69 billion, resulting in a 12% drop in after-hours trading. Stifel analysts responded by lowering their price target for Elastic from $140 to $112, while maintaining a Buy rating, noting macroeconomic pressures and longer sales cycles affecting the U.S. Civilian Federal customers. The company’s initial revenue guidance indicated an 11% year-over-year growth, which was below the expected 14%, reflecting a conservative approach under the new CFO. Needham also maintained a Hold rating on Elastic, citing anticipated pressures from the U.S. Civilian business. Elastic’s recent introduction of GenAI capabilities has seen growing adoption, though it has yet to significantly impact financial performance. Investors continue to watch Elastic’s progress as it integrates new technologies and navigates a challenging business environment.
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