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On Friday, TD Cowen analyst Andrew Sherman increased the price target for Elastic NV (NYSE: NYSE:ESTC) to $125 from the previous $110, while maintaining a Hold rating on the company’s shares. Trading at $115.30, with a significant 32.93% gain over the past six months, InvestingPro analysis suggests the stock is currently overvalued. The adjustment comes on the heels of Elastic’s fiscal third-quarter performance, which surpassed expectations due to robust enterprise consumption.
Elastic’s cloud revenue outperformed predictions by $6.3 million, credited to a surge in usage by a diverse set of large customers. With trailing twelve-month revenue of $1.38 billion and an impressive 74.13% gross margin, the company demonstrates strong operational efficiency. The company’s guidance for fourth-quarter revenue indicates a modest 14% increase, slightly above prior estimates. Sherman noted that while artificial intelligence statistics are promising, there has been a slight deceleration. The number of new customers added remains moderate, and the Net Revenue Retention (NRR) is consistent. Discover more insights about Elastic’s financial health with InvestingPro, which offers 10+ additional exclusive tips for this stock.
Sales and marketing growth for Elastic continues to be below 10%, and the company plans to increase investments in the next fiscal year. These investments are expected to yield only a modest margin expansion. With a solid current ratio of 1.99 and more cash than debt on its balance sheet, the company appears well-positioned to fund these investments. Sherman pointed out that the focus is now shifting to the fiscal year 2026 guidance under the leadership of a new Chief Financial Officer. Current estimates for the year are viewed as slightly elevated.
Sherman acknowledged that Elastic has demonstrated two consecutive quarters of strong cloud performance following a weaker first quarter, a rebound that was initially underestimated by analysts. Despite this, management remains cautious, not assuming the trend will persist due to low visibility into quarterly usage. Sherman expressed a cautious stance, reluctant to declare a definitive trend at this stage.
The analyst also mentioned that the changes in the go-to-market strategy have not disrupted the business. Management has observed some early positive indicators from these changes, which are seen as encouraging signs for the company’s future performance.
In other recent news, Elastic NV has reported strong financial performance, prompting several analyst firms to raise their price targets for the company. RBC Capital Markets increased its price target to $140, maintaining an Outperform rating, while Truist Securities raised its target to $145, citing Elastic’s third-quarter fiscal 2025 results that exceeded expectations. Guggenheim also lifted its price target to $136, acknowledging the company’s robust growth and improved sales execution. Canaccord Genuity and Piper Sandler both adjusted their price targets to $135, with Canaccord highlighting Elastic’s potential in the genAI market and Piper Sandler noting the company’s accelerating cloud growth.
Elastic’s recent financial results have been bolstered by strong demand for its search and GenAI use cases, along with increased Cloud consumption, particularly among larger customers. The company has also revised its fiscal year guidance upwards, though cautiously, reflecting its confidence in continued growth. Additionally, Elastic has appointed a new Chief Financial Officer, Navam Welihinda, which is expected to contribute to its ongoing operational efficiency. Analysts remain optimistic about Elastic’s future, with some noting the potential for the company to surpass its conservative guidance in upcoming periods. Elastic’s strategic focus on GenAI technology and expanding customer relationships appears to be paying off, as evidenced by the increased consumption of its services.
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