Elastic’s Cloud Growth Challenges and Competitive Pressures Justify Hold Rating

TD Cowen analyst Andrew Sherman reiterated a Hold rating on Elastic (ESTC – Research Report) yesterday and set a price target of $80.00.

Andrew Sherman’s rating is based on several factors impacting Elastic’s financial outlook. Despite expectations for overall revenue to align with forecasts, the growth in the Cloud segment is anticipated to be below street estimates, facing a challenging comparison from previous quarters. Management’s recent go-to-market strategy changes have led to reduced revenue growth guidance, reflecting uncertainties in Cloud growth and competitive pressures.
Furthermore, a weaker partner survey indicates a decline in pipeline growth expectations and increased competition in the market. While Elastic has seen early adoption of new products like ESRE, these have not yet significantly contributed to revenue. The competitive environment remains intense, with competitors like OpenSearch gaining traction, which further supports the Hold rating.

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Elastic (ESTC) Company Description:

Elastic NV engages in the provision of open source search and analytics engine services. It offers Elastic Stack, which is a set of software products that ingest and store data from any source, in any format, and perform search, analysis, and visualization. The company was founded by Shay Banon, Uri Boness, Steven Schuurman, and Simon Willnauer on February 9, 2012 and is headquartered in Mountain View, CA.