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TD Cowen has adjusted its outlook for Elastic NV (NYSE: NYSE:ESTC), reducing the price target to $80 from the previous $110 while maintaining a Hold rating on the shares. The revision follows the company's announcement of weaker bookings execution which has impacted its financial guidance for the year. Elastic NV reported a decline in revenue growth projections from 17% to 14%.
The company's billings growth, which stood at 6%, fell short of the market's expectation of 17%. However, Elastic NV's cloud segment performed slightly better than anticipated, exceeding the Street's forecast by $1.1 million and growing by 30%, albeit at a slightly slower pace compared to the previous quarter's 32% growth rate. According to the analyst, there were no significant changes in cloud consumption patterns.
TD Cowen cites changes in Elastic NV's go-to-market (GTM) strategy as the primary reason for the execution of the less-than-expected booking.
The firm anticipates that until the GTM execution issues are resolved, Elastic NV's stock is likely to be rangebound, indicating limited movement in its price in the near term.
The analyst's commentary highlighted the current challenges faced by Elastic NV: "GTM changes caused weaker bookings execution, driving FY rev guide cut from 17% to 14%. Billings growth of 6% missed Street of 17%. Cloud slightly beat Street by $1.1m, growing 30% vs. 32% last qtr, and we don't think there were any major changes to cloud consumption. We think until GTM execution changes are worked through, shares are likely rangebound. PT to $80."
In other recent news, Elastic NV experienced a series of adjustments in its stock price targets from various analysts. Piper Sandler reduced its price target to $100 from $131, maintaining an Overweight rating, following Elastic's lowered forecasts for the second quarter and fiscal year 2025. Truist Securities also adjusted its outlook, reducing the price target to $105 from the previous $140, yet sustained its Buy rating for the stock.
Rosenblatt Securities reduced its price target for Elastic NV shares to $120 from the previous $136, while retaining a Buy rating on the stock. Scotiabank adjusted its outlook on Elastic NV, reducing the stock's price target to $92 from the previous $135 while maintaining a Sector Outperform rating. Wells Fargo lowered its price target on shares of Elastic NV to $100 from the previous $145, but maintained its Overweight rating on the stock.
Recent developments indicate a slowdown in the company's growth, attributed to execution challenges following changes to the go-to-market strategy. Despite these challenges, the company reported an 18% year-over-year revenue increase in the first quarter of fiscal year 2025, with the Elastic Cloud segment growing by 30%. However, disruptions caused by changes in sales segmentation led to a decline in customer commitments, expected to impact subscription growth for the remainder of the year. The company provided Q2 revenue guidance of $353 million to $355 million and full-year guidance of $1.436 billion to $1.444 billion.
InvestingPro Insights
As investors weigh TD Cowen's revised outlook for Elastic NV (NYSE: ESTC), the latest data from InvestingPro provides a deeper look into the company's financial health and market valuation. Elastic NV holds more cash than debt on its balance sheet, which could be a sign of financial stability, an important factor when considering the company's ability to navigate through its go-to-market strategy changes. Despite the recent challenges, analysts predict that the company will be profitable this year, a sentiment that is supported by its profitability over the last twelve months.
From a valuation standpoint, Elastic NV is currently trading at a high earnings multiple, with a P/E ratio of 166.25, reflecting a premium market valuation. Additionally, the company's Price / Book ratio stands at 14.43, indicating that the stock may be priced at a premium relative to its book value. On the growth front, the company has shown a revenue growth of 18.55% over the last twelve months, which could be a positive signal for investors looking for growth potential in their investments.
Investors interested in exploring further details and additional InvestingPro Tips, including metrics such as revenue valuation multiple and return over the last year, can find a wealth of information on the InvestingPro platform. Currently, there are nine additional InvestingPro Tips available for Elastic NV, offering more nuanced insights into the company's financial and market performance.
As the market digests the implications of Elastic NV's revised financial guidance and the potential impact of its GTM strategy changes, these InvestingPro Insights can offer valuable context for making informed investment decisions.
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