Elastic Earnings: Elastic Stretches Its Dollars as Improved Profitability Drives a Strong Period

We are raising our fair value estimate to $67 from $62 for narrow-moat Elastic after the firm kicked off fiscal 2024 with financial results and guidance ahead of our prior estimates. While macroeconomic pressures persist, management’s commentary indicated a stabilizing demand landscape as customers ease their budget optimization plans. This trend is consistent with customer demand trends seen by other security vendors under our coverage and we believe that the worst of budget optimization impacts are in the rearview mirror for vendors like Elastic. At the same time, despite being gradually improving, macro conditions remain tight and continue to weigh on the firm’s financials including its top-line growth.