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Elastic NV: The Search Engine of the Future?

Elastic made new all-time highs in August. Is the stock setup for a monster run?

Insights team

Last updated: 9/03/2020.


Since going public in 2018, Elastic NV ($ESTC) has traded in a ~$60-$100 range, until recently (see chart below). The stock is up 66% YTD, compared to a YTD gain of 12% for the S&P 500.


What's its chart telling us?

  • The stock broke above the supply (resistance) level near $100. A level it's failed to overcome on its past three attempts (blue arrows).
  • If the stock is primed for a massive run, the $90-$100ish zone should hold the downside in check.

What they do

Elastic is a search company. Similar to Google but for business applications.

For example: Uber uses Elastic to help locate nearby riders and drivers.

Its primary product is Elastic Stack. Elastic Stack is a set of software products that ingests and stores data from any source, and in any format, and performs search, analysis, and visualization in milliseconds or less.

Developers use Elastic Stack to apply the power of search to their data and solve business problems.

Elastic Stack is four primary products:

  1. Elasticsearch-Is a distributed, real-time search and analytics engine and datastore for textual, numerical, geospatial, structured, and unstructured data.
  2. Kibana-Is the user interface for the Elastic Stack. It’s the visualization layer for data stored in Elasticsearch.
  3. Logstash-Is the data processing pipeline for ingesting data into Elasticsearch or other storage systems simultaneously from many sources.
  4. Beats-A family of lightweight, single-purpose data shippers for sending data from edge machines to Elasticsearch or Logstash.

For a visual overview, watch this 6-minute video.

Their business model

Its business model is a combination of open-source and proprietary software. Developers can download its software directly from their website. Some features are free, and others require a subscription.

For a more in-depth look at their business model, start reading on page 5 of their annual report.


KEY FACTS
Ticker $ESTC
Headquarters Mountain View, CA
# of Employees 1,000
Market Cap. $9.22 billion
TTM Revenue $466.8 million
Date Founded 2012
IPO Year 2018
Short Interest 6.5%
52-Week Range $44-$112

KEY FINANCIALS TTM, $ in millions
Revenue $466.8
Gross Margin 72%
EBITDA ($127.0)
EBITDA Margin (27.2%)
Net Income ($144.4)
Net Income Margin (30.9%)
Free Cash Flow $95.1
Free Cash Flow Margin 20%

RETURNS TTM
Return on Assets (13.5%)
Return on Invested Capital (ROIC) (23.6%)
Return on Equity (42.0%)

VALUATION MULTIPLES
Forward Price/Revenues 16.4x
Trailing Price/Revenues 20.3x