Elastic NV (NYSE:ESTC) has been one of the strongest names in the market since the March broad index “crash” lows, with shares of the data solutions name advancing as much as 125% in the past 3 months. Q1 data hit the wires on Thursday, and the stock took a small hit, dropping about 7% in immediate reaction following a strong quarter with mixed in-line guidance and what one might see as a FY21 sandbag job, lowering the bard to 25% top-line growth (from 57% in FY20).
Business snapped back in April and has remained healthy in May. Elastic has limited (15%) exposure to weak verticals and SMBs.
Still, the company offered what seems like ultra conservative guidance given its expectation for a soft economy and slow recovery. Obviously, that doesn't really square up with the exuberance we have seen in the broader market since the bottom.
The outlook is conservative and likely sets up a beat and raise story for the rest of the year, but also likely stokes competitive concerns. Software companies that are well positioned have tended to snap back in this environment. ESTC may be no exception to this rule and should be a focus for traders this week.
Elastic NV (NYSE:ESTC) trumpets itself as a search company that delivers technology that enables users to search through structured and unstructured data for a range of consumer and enterprise applications.
It primarily offers Elastic Stack, a set of software products that ingest and store data from various sources and formats, as well as perform search, analysis, and visualization.
The company's Elastic Stack product comprises Elasticsearch, a distributed, real-time search and analytics engine, and data store for various types of data, including textual, numerical, geospatial, structured, and unstructured; Kibana, a user interface, management, and configuration interface for the Elastic Stack; Beats, a single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash; and Logstash, a data processing pipeline for ingesting data into Elasticsearch or other storage systems.
It also provides software solutions on the Elastic Stack that address cases, including app search, site search, enterprise search, logging, metrics, application performance monitoring, business analytics, and security analytics. Its products are used by individual developers and organizations of a range of industries.
Our ESTC Earnings Summary:
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Elastic beats by $0.19, beats on revs; guides Q1 EPS above consensus, revs in-line; guides FY21 EPS above consensus, revs below consensus
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Reports Q4 (Apr) loss of $0.12 per share, $0.19 better than the S&P Capital IQ Consensus of ($0.31); revenues rose 52.6% year/year to $123.6 mln vs the $117.15 mln S&P Capital IQ Consensus.
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Total subscription customer count was over 11,300, compared to over 10,500 in Q3 FY20, and over 8,100 in Q4 FY19.
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Total customer count with Annual Contract Value (ACV) greater than $100,000 was over 610, compared to over 570 in Q3 FY20, and over 440 in Q4 FY19.
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Co issues guidance for Q1, sees EPS of ($0.19)-($0.17) vs. ($0.37) S&P Capital IQ Consensus; sees Q1 revs of $119-$122 mln vs. $121.80 mln S&P Capital IQ Consensus.
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Co issues mixed guidance for FY21, sees EPS of ($0.98)-($0.85) vs. ($1.32) S&P Capital IQ Consensus; sees FY21 revs of $530-$540 mln vs. $561.27 mln S&P Capital IQ Consensus.
Our ESTC Research and Conference Call Notes:
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Elastic (ESTC) cited nothing more than caution on the macro outlook for the soft guidance
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Elastic cited nothing other than caution regarding the macro outlook when asked about the soft revenue guidance for FY21.
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Guidance is "prudent" as mgmt expects a difficult, gradual recovery in the economy, which could weigh on billings and elongate the sales cycle.
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Elastic saw a pause in March but it came back in April and momentum continued into May. Renewals and expansion remain healthy.
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Diversified exposure in size, geography, vertical: < 15% exposure to impacted verticals; ~15% exposure to SMB, where churn was offset by new customers.
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Continue to invest with discipline and drive margin improvement. Sees positive FCF in FY22
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WFH tailwind: More virtual collaboration creates more data and uses cases for search; observability and security markets also expand with new networks and devices
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Does not need to raise capital given limited burn rate, $300M cash balance.
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The soft guidance is disappointing and a bit of a head scratcher given the slowdown it implies considering how strong Q4 was... Some skepticism of the pure macro excuse is natural, but the outlook does seem to maintain mgmt's ability to 'beat and raise' throughout FY21.
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The stock was overbought and the 13x sales multiple is not cheap (unless you compare it to peers growing at a similar rate), so the stock probably won't get aback above $90 tomorrow but in this environment I wouldn't be surprised if it does.
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Monness Crespi & Hardt raises their ESTC tgt to $100 from $80. Analyst Brian White added, "Elastic N.V. reported strong 4Q:FY20 results and served up a healthy 1Q:FY21 outlook, while initiating prudent guidance for FY:21 given the current environment. We are raising our estimates and increasing our 12-month price target to $100 from $80."
Oppenheimer raisedits target to $95 from $90. "Elastic reported a strong quarter leveraging solid execution and a broad and increasingly mature portfolio. While investors might view FY21 guidance negatively, we believe it's appropriately cautious and takes into account a healthy level of conservatism. We maintain a positive stance on the shares, which is reinforced by solid customer metrics and an improving margin/FCF profile."
