Why elastic stock climbed 10% higher today

What happened

Actions of Elastic (NYSE: ESTC) were up over 10% today at market close. It comes after a recent double-digit percentage drop – first due to concerns about the omicron variant, and then a sell off following what was in fact a rock-solid quarterly earnings update. last week.

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The cause of today’s turnaround? A Wall Street analyst believes the punishment inflicted on Elastic is unwarranted.

So what

Specifically, JP Morgan Analyst Mark Murphy took Elastic from neutral to overweight with a one-year price target of $ 156. Closing today at just over $ 128 per share, that implies a 21% rise for the stock if the prediction is correct.

The short-term stock price outlook isn’t that meaningful for long-term investors who own companies for their potential years, but I for one agree with the note that the Elastic slowdown seems exaggerated. The company has grown steadily at a double-digit percentage rate for years (42% sales growth in the last quarter) and has managed its transition to cloud-based software much better than its peers. of the sector. Splunk. If you’re looking for leading cloud data analytics and observability stock, Elastic is worth being in the conversation right now.

Now what

For the current fiscal year, Elastic expects revenue to grow about 36% year-over-year to at least $ 826 million. Based on this outlook, the shares are currently trading at 14.5 times sales. That’s not a terrible bonus for a high growth software company with a lot of expansion ahead of it – and one that could one day be very profitable as well.

Considering Elastic’s sustainable growth path, today’s analyst upgrade and subsequent stock leap is not that unusual. Keep this cloud-based software company on your radar.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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