Piper Sandler optimistic on ESTC stock ahead of earnings

On Tuesday, Piper Sandler provided a preview for the Security & Infrastructure Software (ETR:SOWGn) sector’s January quarter, expressing optimism about the upcoming earnings reports. The firm’s analysis highlighted a sequential uptick in channel checks for the January-quarter cohort, suggesting a strong end to the year bolstered by a budget flush and minimal concerns regarding tariff impacts on spending trends.

The majority of resellers reported a significant budget flush in the fourth quarter, larger than the previous year, indicating a positive end to the year for the software sector. Despite the overall encouraging signs, Piper Sandler noted some apprehension regarding guidance expectations, which may be set lower than anticipated due to a variety of factors, including U.S. Federal dynamics and uncertainty related to the Department of Justice’s (DOGE) future spending.

Piper Sandler’s report also mentioned that on-calendar vendors reported solid results, beating top-line expectations after adjustments for foreign exchange and SaaS transitions. However, the price action for these stocks has been mixed, with some companies setting initial 2025 guidance expectations lower than expected. The firm pointed to heightened uncertainty in U.S. Federal spending trends due to changes in administration and cost-cutting efforts, which could significantly impact companies with exposure to this sector.

The firm provided insights into how to approach the upcoming earnings reports, maintaining a positive long-term view on the sector’s prospects. Specific companies were mentioned, with CrowdStrike (NASDAQ:CRWD) having estimates that might be too optimistic, though the company maintains a robust 75.24% gross profit margin and strong liquidity position. InvestingPro subscribers can access over 15 additional ProTips and detailed financial metrics to better evaluate CRWD’s upcoming earnings report, scheduled for March 11, 2025. DocuSign (NASDAQ:DOCU) is expected to provide guidance in line with expectations, albeit with potential margin pressures. GitLab (GTLB) is projected to grow over 25% next year, but guidance might be conservative. SentinelOne (NYSE:S) could see conservative guidance adjustments by the new CFO, and Okta (NASDAQ:OKTA) is in a position to potentially raise guidance slightly.

Piper Sandler concluded that Elastic (NYSE:ESTC) appears to have the cleanest setup for the upcoming earnings reports, indicating a more favorable outlook for the company compared to its peers in the sector. For CrowdStrike, analysts maintain a strong buy consensus with an average rating of 1.85, though InvestingPro’s comprehensive analysis suggests the stock may be trading above its Fair Value. Investors can access detailed valuation metrics and the full Pro Research Report, which provides deep-dive analysis of CRWD and 1,400+ other top stocks.

In other recent news, CrowdStrike has been the subject of various analyst reports and industry tests. KeyBanc Capital Markets raised its price target for CrowdStrike to $480, maintaining an Overweight rating. This follows a series of positive checks for the fourth fiscal quarter, suggesting high expectations for the company’s performance. However, the firm expressed caution ahead of CrowdStrike’s earnings report.

On the other hand, Baird analysts revised their stance on CrowdStrike, downgrading it from Outperform to Neutral, despite raising their price target from $390 to $430. This adjustment reflects the belief that the significant relative outperformance of CrowdStrike over the past six months, coupled with its elevated valuation, may limit the potential for near-term gains in the stock price.

CrowdStrike’s Falcon platform has recently excelled in the SE Labs Enterprise Advanced Security (EDR) Ransomware Test, detecting and protecting against all tested ransomware threats. This achievement reinforces the company’s position as a leader in cybersecurity. Meanwhile, JMP Securities reaffirmed its Market Outperform rating on CrowdStrike, with a steady price target of $400, highlighting robust sales performance and potential for revenue growth.

Lastly, Truist Securities updated its outlook on CrowdStrike, increasing the price target to $385 from $375, while reaffirming a Buy rating. This follows CrowdStrike’s reported recovery from the impacts of the global IT outage that occurred last year. The company’s third-quarter results for fiscal year 2025 demonstrated robust growth, attributed to strong platform adoption and success with Falcon Flex (NASDAQ:FLEX) deals.

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