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Is It Too Late to Buy ESTC?

Jack KelloggAvatar
Written by Jack Kellogg Reviewed by Tim Sykes Fact-checked by Ellis Hobbs
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Elastic N.V.’s stock surged on the back of investor optimism driven by Microsoft’s reported expansion with Elasticsearch capabilities. On Friday, Elastic N.V.’s stocks have been trading up by 13.13 percent.

Recent Developments in Elastic

  • The Search AI Company, Elastic, announced the expansion of their Elasticsearch Open Inference API, adding support for Jina AI’s new embedding models and reranking products. This enhancement is set to offer superior tools for developing semantic applications and information retrieval.

Candlestick Chart

Live Update At 11:37:33 EST: On Friday, February 28, 2025 Elastic N.V. stock [NYSE: ESTC] is trending up by 13.13%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • Elastic management is slated to present at the Morgan Stanley Technology, Media & Telecom Conference. The presentation will be streamed live, with playback available on their Investor Relations page.

A Quick Peek at Elastic’s Earnings

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Elastic recently released a robust financial outlook that surprised many analysts. The company beat expectations for Q3 earnings, reporting a notable revenue of $382M over the anticipated $369M. Their earnings per share (EPS) also exceeded predictions, coming in at 63 cents against a forecasted 47 cents.

This positive trend carries over into Elastic’s Q4 projections, with expected EPS between 36-37 cents (beating a consensus of 31 cents) and revenues projected to be in the $379M to $381M range. Investors are taking note of Elastic’s improved operating margins, now expected to hit approximately 14.7% for the fiscal year 2025.

With the focus on accelerating growth, Guggenheim’s decision to raise their Elastic price target from $120 to $130 speaks volumes about market confidence. This decision is driven by promising industry developments in log analytics, boosted by innovative GenAI use cases.

More Breaking News

The Elastic Puzzle: Market Implications

Elastic’s recent announcements have certainly stirred the market. The enthusiastic reception of their earnings report is not just smoke and mirrors. The company’s increase in EPS forecasts and surprised revenue projections highlight a strong management team focused on growth. Moreover, the sound-raising target reflects the market’s confidence in their strategic direction.

Investors are also closely monitoring Elastic’s expansion into AI-assisted technology. The improved capabilities of their Elasticsearch Open Inference API leverage cutting-edge technology to bolster applications across various semantic and information retrieval spectrums. This stride in AI could fortify Elastic’s positioning amidst growing competition within the search and analytics market.

Elastic’s investor presentation at the Morgan Stanley Conference signals a proactive approach in maintaining open communication lines with stakeholders. Engaging in such high-profile forums empowers the company to present its vision directly to influential audience demographics.

Crunching the Numbers: A Closer Look

Elastic’s results are embellished with promising figures. Their revenues have continuously grown year-over-year, boasting a 23.3% increase over three years and a staggering 32.08% over five. While the gross margin sits impressively at 74%, the company wrestles with a high price-to-earnings ratio of 168.8—a figure detached from the industry average of 15.02 over five years.

Amidst these promising statistics, some shadows linger. Elastic’s profitability ratios, including EBIDTA and EBIT margins, signal operational inefficiencies when juxtaposed against competitors. The company navigates through this challenge, though, with strong liquidity measures. Their quick ratio at 1.8 and current ratio at 2 indicate a healthy capability to address short-term obligations.

Examining their management effectiveness indices unveils mixed results. Return on assets is slightly negative, but the return on capital LTM stands at a welcoming 10.13%. The telling EBITDA of 11.14M, contrasted by significant prior-year losses, implies an upward trajectory worth watching.

Concluding Thoughts

Elastic’s journey takes an interesting turn with promising earnings and tech innovations catapulting it towards investor favor. Its forward-thinking approach—embodied in the latest Elasticsearch enhancements—cements its commitment to leading the charge in AI-driven search solutions. However, while the stock’s recent surge may trigger FOMO (fear of missing out), discerning traders should keep a watchful eye on profitability trends and macroeconomic conditions. As millionaire penny stock trader and teacher Tim Sykes says, “It’s not about how much money you make; it’s about how much money you keep.” This wisdom rings true in the current market environment, highlighting the importance of sustainable financial strategies.

The market’s reaction to Elastic’s strategic moves underlines both the excitement and caution of an evolving tech landscape. For now, the company appears well-poised to capitalize on the momentum they have garnered, making it an intriguing piece in the ever-evolving financial puzzle.

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”