On Wednesday, UBS initiated coverage on Elastic NV (NYSE:ESTC) with a positive outlook, assigning the stock a Buy rating and setting a price target of $135.
The firm's analysis, based on conversations with over twenty customers, partners, and industry experts, suggests that Elastic's potential in artificial intelligence (AI) is not fully reflected in its current stock price.
Elastic NV's stock is currently valued at 6.9 times its projected calendar year 2025 revenues. UBS forecasts an 18.7% revenue growth for the fiscal year 2025, which is higher than the consensus estimate of 17.3% by other analysts.
This growth expectation includes a possible $15 million in incremental revenue from Elastic's Endpoint Security Resource Efficiency (ESRE) in the fiscal year 2025.
UBS's stance on Elastic is bolstered by several factors: the anticipated AI revenue increase, potential additional revenue from Security Information and Event Management (SIEM) incumbents, and an underappreciated 18-19% revenue growth estimate for fiscal years 2025 and 2026.
Additionally, the firm anticipates expanding free cash flow (FCF) margins reaching the mid-teens in the next few years.
The analysis by UBS reflects confidence in Elastic NV's growth trajectory and its ability to capitalize on emerging opportunities in AI and cybersecurity.
The new price target of $135 implies a significant upside from the current trading levels of Elastic NV's shares on the New York Stock Exchange.
InvestingPro Insights
As UBS initiates coverage on Elastic NV with a strong Buy rating and a price target of $135, the latest data from InvestingPro aligns with the optimistic outlook for the company's growth, particularly in the AI space. With a market capitalization of approximately $11.03 billion and a high P/E ratio of 191.51, Elastic is trading at a significant earnings multiple. This high valuation is supported by a robust revenue growth of nearly 17.88% over the last twelve months as of Q1 2023. Additionally, the company's gross profit margin stands at 74.01%, demonstrating its ability to maintain profitability amidst expansion.
InvestingPro Tips highlight Elastic's high return over the last year and the analysts' prediction that the company will be profitable this year. These insights are particularly relevant as they support UBS's analysis that Elastic's potential in AI is not yet fully priced in. Moreover, with a 1 Year Price Total Return of 66.49%, investors have been rewarding the company's performance. For those looking to delve deeper into Elastic's financials and forecasts, there are over 10 additional InvestingPro Tips available, providing a comprehensive analysis of the company's market position and future potential.
To access these insights and more, consider subscribing to InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. The insights provided by InvestingPro can help investors make informed decisions, especially when evaluating a company like Elastic NV, which operates at the forefront of AI and cybersecurity.
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