Elastic: This Company Pulls in Profits

07/25/2019 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

2019 has so far been the year of the big-name IPO, with Uber, Lyft, Pinterest, Slack, and Beyond Meat all making plenty of headlines, observes Mike Cintolo, editor of Cabot Growth Investor.

But Elastic (ESTC), which came public last fall to much less fanfare (likely due to the market implosion at that time), has as good a story as any of them and a chart that is coming to life.

The company’s claim to fame is its platform that can take in data of any format or type and allow organizations to easily search it and get relevant, telling results from it.

What we’ve always liked about it is the pervasiveness of the applications.  In consumer apps, for example,  Tinder to match people, Uber use Elastic to match riders and drivers and Instacart uses it to find groceries online.

Its applications are also used in monitoring the performance of servers, networks, connected devices and websites (how fast or slow are shoppers moving through the buying process on our site?), cybersecurity or more. Overall, Elastic is becoming a must-have solution for thousands of clients.

The bottom line is still deep in the red, which isn’t ideal, but revenues, billings and deferred revenue have been clipping along at 60%-plus rates on a currency-neutral basis and one of our favorite metrics — same-customer revenue growth — has been north of 30% for a whopping ten straight quarters.

As for the stock, it fell nearly 30% over a four-month stretch, but has zoomed back toward its highs on excellent volume over the past couple of weeks. Earnings aren’t due until late August/early September, so some calm trading could set up a nice entry point.

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