Elastic Continues to Dip Despite Excellent Q2 Results


This article was originally published on TipRanks.com.

Netherlands-based search company Elastic NV (ESTC) reported excellent financial results for the fiscal second quarter ended October 31 after the market closed on Wednesday.

Despite robust results, shares of the company closed 15% lower on Thursday and lost another 1.2% in the extended trading session to end the day at $116.90. The stock was trading 0.2% down, at the time of writing, in the early trading session on Friday.

Elastic offers open-source search and analytics engine services that are used by companies like eBay (EBAY), Wikipedia, Yelp (YELP), Uber (UBER), Lyft (LYFT), Tinder, and Netflix (NFLX).

Q2 Results

The company reported an adjusted loss of $0.09 per share, narrower than analysts’ expectations of a loss of $0.16 per share but wider than the year-ago loss of $0.03 per share.

Total revenue increased 42% year-over-year to $206 million, beating the Street’s estimate of $194.53 million. (See Insiders’ Hot Stocks on TipRanks)

Elastic Cloud revenue grew 84% to $69 million and Deferred revenue jumped 26% to $390.3 million. Calculated billings rose 30% to $231.2 million.

CEO Comments

The CEO of Elastic, Shay Banon, said, “Our strong second-quarter results were fueled by the rapid adoption of Elastic Cloud, the increased strategic relevance of our solutions, and continued expansion across our customer base.”

“Customers are increasingly choosing Elastic Cloud to reduce complexity, automate operations, and make faster, data-driven decisions. Given the ongoing momentum, we expect Elastic Cloud revenue to exceed 50% of our total revenue in the next three years.”

Outlook

Meanwhile, the company has issued guidance for the fiscal third-quarter ending January 31, 2022, and Fiscal Year 2022 ending April 30.

For the third quarter, Elastic expects revenue to lie between $207 million and $209 million, and adjusted loss to range from $0.20 per share to $0.24 per share.

The Street expects the company to report a loss of $0.22 per share and revenue of $202.59 million in the third quarter.

Furthermore, revenue is expected to range from $826 million to $832 million in Fiscal Year 2022, above analysts’ expectations of $813.74 million.

Adjusted loss is anticipated to come between $0.51 per share and $0.61 per share, with the consensus estimate lying towards the higher end of the guidance range at $0.60 per share.

Wall Street’s Take

Following the release of the second-quarter results, Monness analyst Brian White assigned a Buy rating to the stock with a price target of $230 (94.5% upside potential).

In a research note to investors, White said, “Elastic will benefit from an improving economy, strong secular tailwinds, expanded capabilities, and accelerated digital transformation.”

Additionally, Robert W. Baird analyst Jonathan Ruykhaver maintained a Hold rating on the stock and lowered the price target to $150 from $170 (26.8% upside potential).

Ruykhaver said, “Strengthening demand trends, strong execution, and increased investment into the business all suggest guidance for both F3Q and FY2022 remains conservative.”

Overall, the stock has a Strong Buy consensus rating based on 7 Buys and 2 Holds. The average Elastic price target of $189.78 implies 60.5% upside potential. Shares have lost 16.4% year-to-date.

Risk Analysis

According to TipRanks’ Risk Factors tool, Elastic is at risk mainly from two factors: Finance & Corporate and Tech & Innovation, which account for 39% and 20%, respectively, of the total 74 risks identified for the stock.

Under the Finance & Corporate risk category, the company has 29 risks, and under the Tech & Innovation category, there are 15 risks. The details of these risks can be found on the TipRanks website.

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