Elastic stock target cut to $90 by TD Cowen on cloud revenue miss

On Friday, TD Cowen’s analyst Andrew Sherman revised the price target for Elastic NV (NYSE:ESTC) shares, lowering it to $90 from the previous $105, while maintaining a Hold rating on the stock. Currently trading at around $80, Elastic’s stock sits well below the analysts’ average target of $160, with 22 analysts recently revising their earnings estimates upward according to InvestingPro data. The adjustment follows a quarter that Sherman described as mixed, primarily due to a shortfall in cloud revenue—a first since the fourth quarter of 2023.

Elastic’s cloud revenues slightly missed Wall Street’s expectations, contributing to a forecast for fiscal year 2026 revenues that is 12% below the Street’s anticipation of 14%. While the company has maintained strong revenue growth of 17% over the last twelve months, the lowered expectations are partly attributed to observed weaknesses in the U.S. Federal market in the first quarter. Despite management’s confidence that these issues have been sufficiently de-risked, Sherman expressed caution, suggesting that Elastic will need to demonstrate this more convincingly.

In his commentary, Sherman acknowledged that management was pleased with the bookings for the quarter. However, he also pointed out a deceleration in remaining performance obligations (RPO) bookings. This slowdown, according to the analyst, may lead to Elastic’s shares remaining range-bound until there is clear evidence of a recovery in cloud revenue performance.

The analyst’s comments reflect a cautious stance on Elastic’s near-term prospects. Sherman reiterated the Hold rating, indicating that until Elastic can show a turnaround in its cloud business, the stock’s potential for growth might be limited.

In other recent news, Elastic NV reported strong fourth-quarter results with total revenues of $388.4 million, surpassing the Street’s estimate of $380.4 million. Despite this revenue beat, the company’s fiscal year 2026 revenue forecast fell short of market expectations, leading to a cautious outlook. Elastic’s cloud revenue, which accounted for 47% of total revenue, was slightly below expectations at $181.5 million. The company is facing macroeconomic pressures, particularly in the U.S. public sector, resulting in longer sales cycles. RBC Capital, Wedbush Securities, Cantor Fitzgerald, and Stifel have all adjusted their price targets for Elastic, citing these challenges. RBC Capital and Wedbush maintained an Outperform rating, while Cantor Fitzgerald kept a Neutral rating, and Stifel retained a Buy rating. Elastic’s new CFO, Navam Welihinda, provided his first full-year guidance, projecting an 11% year-over-year growth in constant currency terms. Analysts have noted Elastic’s strategic investments in GenAI capabilities, though these have yet to significantly impact financial performance. As the company navigates these challenges, its future financial health will be closely watched by investors and analysts alike.

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