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Investing.com -- UBS resumed coverage of search software maker Elastic NV with a Buy rating, citing a more favorable sales outlook and medium-term growth potential from generative artificial intelligence.
The brokerage set a $95 price target, valuing the company at about 5.5 times estimated 2026 revenue, and said recent industry checks point to stable or slightly improving demand.
UBS expects revenue to grow 13% in fiscal 2026 and 2027, above the company’s guidance for about 12% growth, with upside to 15-16% possible.
UBS said management’s 2026 guidance appears conservative, as some anticipated headwinds, such as weakness in the U.S. public sector, have not spread to other markets. Free cash flow forecasts for 2026 and 2027 are 4% and 6% above Wall Street’s consensus, it added.
The firm said large customers are preparing to expand spending on generative AI search tools, which could lift search revenue by 10-20% over several years, translating into a roughly two-percentage-point boost to total revenue growth.
It noted competition in “vector search” databases from MongoDB, Couchbase, Postgres and private vendors such as Pinecone, though Elastic could gain as use cases grow more complex.
Feedback on Elastic’s observability products, used for monitoring and application performance, was positive, while security offerings faced stronger competition from rivals such as CrowdStrike and Palo Alto Networks. UBS also said the company’s wins against Splunk were smaller than expected.
UBS views competition as the main risk but said it is largely reflected in the stock’s current valuation of about four times estimated 2026 revenue.