Elastic (NYSE:ESTC) Closes On Record High Following Product Upgrades, Analyst Optimism

Ramish Zafar
Elastic's co-founder and chief executive officer Mr. Shay Bannon at the Berlin Buzzwords in 2019. Image: Richard Wöber

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Software provider Elastic N.V. (NYSE:ESTC) had an amazing run on the stock market today after the company's shares closed at an all-time high price of $106.98. The bullish run came following the stock's strong performance early in the day, as the shares gained roughly 8% of the day's 10% gain within ninety minutes of market open.

More importantly, the gains came after Elastic announced upgrades to its software solutions on Wednesday and Citi Group upgraded the stock to Buy and opened a "90 day positive catalyst watch" on the shares.

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NYSE:ESTC's remarkable run on the stock market has ensured that all of the company's share price value losses since this year's stock market crash in March have now been recovered and the shares have managed to grow. This growth also comes at a time when the demand for remote workplace enterprise software solutions has grown, with the latest trio of announcements that the company made yesterday having come at the right time.

The share price growth that Citi hopes might continue over the next month has also put NYSE:ESTC above its previous all-time high of $102.59 that it touched in summer last year.

On Wednesday, Elastic announced that it would make certain features of its Workplace Search feature free for use, with the end goal of helping users stay fiscally healthy. Workplace Search lets organizations condense all of their document and media repositories in a single platform for ease of use and productivity improvement, and the platform is part of Elastic's larger Enterprise Search solution.

Additionally, Alphabet Inc's Gmail email service became a pre-built content source integration in Workplace Search, with the complete Enterprise Search platform also gaining support with the company's open-source data visualization dashboard dubbed Kibana.

Elastic N.V.'s Workplace Search allows accessing different storage mediums from a single platform. Image: Elastic N.V.

Elastic also upgraded the Elastc Stack's security features for Windows and macOS users and made malware management options available for free. Elastic Stack allows users to deploy Elastic Search on their own cloud networks, and the security upgrades provide users with the ability to detect malware and monitor their infrastructure for potential threats.

At the end of its fiscal year 2020 in April, Elastic N.V. had earned $428 million in revenue as it exhibited strong year-over-year growth. Yet at the same time the company's research and development and marketing costs also bloomed, and the company was unable to turn a profit. At the end of FY 2020, the company's grew 53% year-over-year but net loss also grew by 63%, indicating that the costs of this growth and Elastic's investment into future oppurtunities outstripped their initial results.

Accompanying these growth trends was the trend shown by Elastic's receivables, which also mirrored the increases in its revenue and net loss increases. Elastic's accounts receivables grew by a staggering 60% in the fiscal year 2020, after Elastic recognized $2.6 million of unbilled receivables as revenue.

For this fiscal year, Elastic hopes to earn at least $530 million in revenue and at the end of this quarter, it expects to in between $119 million - $122 million. The bulk of the company's revenues come from subscription-based services, and more importantly, the company's forward guidance for FY 2021 expects net loss to drop by at least 97% and sit at 0.17/share.

Citi's new price target for the company is $126 and analyst consensus estimates polled by The Wall Street Journal for Elastic N.V's Q1 FY21 negative earnings-per-share sit at $0.18.

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