Why Elastic Stock Is Still a "Strong Buy" Now

Elastic NV (NYSE: ESTC) is at it again with another stellar quarter. We first talked about how Elastic could be the next Google back in July. Now shares are up roughly 40% and still reasonably priced for it to be a strong buy for tech investors.

One reason for that is its latest earnings report, which showed outstanding growth.

Total revenue for the quarter was $144.9 million, an increase of 43% year over year, and its SaaS revenue saw an increase of 81% year over year.

Even as COVID-19 continues to keep people home, Elastic continues to add customers. It now boasts 800 more to reach 12,900. Not only did it increase its customer count, but it also added another 20 customers spending over $100,000 in annual contract value all while keeping its net expansion rate above 130%, a key metric for SaaS companies. When this number is over 100%, it means that growth from the existing customer base is growing faster than any losses from that same base.

Elastic has continued to thrive and innovate, bringing new products to its user base. It introduced Elastic Agent, allowing for data collection across security and observability use cases, and Kibana Lens, a product allowing anyone to create drag-and-drop visualization with any kind of data. These are the kind of innovations I like to see, and they're why Elastic's customer retention is so good.

The U.S. government is even a customer and recently closed a new multiyear deal for its security products.

And Elastic can sustain this type of growth because it solves an essential problem for businesses...

What Makes Elastic Stock a Long-Term Buy and Hold

For Elastic, the theme of solving multiple use cases is really shining. It is amazing to think that the company was created out of a search engine built by the CEO for his wife's growing list of recipes.

Now it's being applied to thousands of use cases with search at the heart of everything. From Uber Technologies Inc. (NYSE: UBER) and Lyft Inc. (NASDAQ: LYFT) using search to match locations and drivers, to Walmart Inc. (NYSE: WMT) for real-time analytics, and Bayer AG (OTCMKTS: BAYRY) for patent search, it truly is a flexible product.

Here are just a few more examples of how customers are using Elastic products:

  • Online grocery app HappyFresh uses the Elastic App Search to help it scale with COVID-19 demand.
  • The U.S. Naval Criminal Investigative Service (NCIS) uses Elasticsearch to create a custom tool to turn evidence into insights.
  • Elastic is powering search for near real-time access to aircraft technical documents for Airbus SE (OTCMKTS: EADSY).
  • Facebook Inc. (NASDAQ: FB) uses Elastic to deliver its support experience to billions of users.
  • Cisco Systems Inc. (NASDAQ: CSCO) uses Elastic to leverage its data collection and detect and defeat hackers.

As you can see, the use cases that revolve around data and search are near limitless and growing. Just this past quarter, Elastic held its first virtual conference, hosting more than 300 sessions with 25,000 registrants. This just shows how robust the developer community is around Elastic.

With the company guiding next-quarter revenue to be between $145 and $147 million, it is still being similarly conservative like last quarter, as that would imply a growth rate of 29% year over year at the midpoint. It has had over 10 quarters of over 40% growth, and that could continue given its pace of innovation.

It's not too late to buy now.

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