DoD tests AI models that make it easy to switch from vendors like Palantir
On Friday, Stifel analysts adjusted their outlook on Elastic NV (NYSE:ESTC), reducing the price target from the previous $140.00 to $112.00 while maintaining a Buy rating on the shares. According to InvestingPro data, Elastic currently commands a market capitalization of $9.61 billion, with analyst targets ranging from $75 to $160 per share. The revision followed Elastic’s latest earnings report, where the company posted a slight revenue beat of 2% compared to the higher levels of over 3% in recent quarters. Despite current challenges, InvestingPro data shows Elastic maintaining robust fundamentals with a healthy gross margin of 74.27% and year-over-year revenue growth of 17.95%. The company experienced challenges, including macroeconomic pressures and longer sales cycles, particularly with U.S. Civilian Federal customers.
Elastic’s initial revenue guidance for FY26 indicated an 11% year-over-year increase on a constant currency basis, which was below the anticipated 14% growth. This conservative forecast contributed to the stock’s decline of approximately 12% in after-hours trading. InvestingPro analysis reveals strong liquidity metrics, with a current ratio of 2.02 indicating the company’s ability to meet short-term obligations. Get access to 7 more key InvestingPro Tips and comprehensive financial analysis through InvestingPro. Stifel noted that the guidance might be cautious, as it accounts for the public sector’s weakness potentially affecting the broader business and anticipates possible consumption headwinds in the upcoming quarters.
The firm acknowledged that this is the first revenue guidance presented by Elastic’s CFO, Janesh Moorjani, and that the company has not yet observed a significant macroeconomic or consumption slowdown. Stifel suggests that the conservative nature of the guidance could position Elastic for better-than-expected performance in the future.
Stifel’s analysis highlighted several factors that could support Elastic’s growth, including improved go-to-market execution, stable consumption trends, a large and expanding opportunity in generative AI (GenAI), and the cautious revenue guidance. These elements, according to Stifel, could lead to more consistent outperformance by Elastic in the subsequent quarters. Supporting this outlook, 22 analysts have recently revised their earnings estimates upward for the upcoming period. The new price target of $112.00 is based on approximately 6 times the projected calendar year 2026 enterprise value to revenue of $1.8 billion.
In other recent news, Elastic N.V. reported better-than-expected fourth quarter results, with adjusted earnings per share reaching $0.47, surpassing the consensus forecast of $0.37. Revenue for the quarter rose 16% year-over-year to $388 million, beating expectations of $380.53 million. Despite these positive results, the company’s revenue guidance for fiscal 2026 fell short of analyst estimates, with projections ranging from $1.655 billion to $1.670 billion, below Wall Street’s expectation of $1.69 billion. This guidance represents a 12% growth from fiscal 2025. Elastic Cloud revenue increased by 23% year-over-year to $181.5 million, and the total customer count with annual contract value over $100,000 grew to more than 1,510. CEO Ash Kulkarni highlighted the company’s strong growth and leadership in Search AI. However, the weaker-than-expected revenue outlook seems to have impacted investor sentiment negatively. The sharp decline in shares suggests that Wall Street was anticipating stronger growth projections for the upcoming year.
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