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Why Elastic Stock Climbed 13.8% in February

By Keith Noonan - Mar 9, 2020 at 7:57AM

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Strong quarterly results and guidance bolstered the enterprise-search company as the broader market sold off, but its stock hasn't been as resilient in March.

What happened

Shares of Elastic (ESTC -6.86%) rose 13.8% in February, according to data from S&P Global Market Intelligence.

Despite concerns about the impact of the novel coronavirus officially known as SARS-CoV-2 racking the market, the enterprise-search specialist's stock bounced late in the month thanks to better-than-expected quarterly results and guidance.

ESTC Chart

ESTC data by YCharts.

Elastic reported third-quarter earnings after the market closed on Feb. 26 and delivered sales and earnings results that topped the market's expectations. Sales grew 61% year over year on a constant currency basis to hit $113.2 million and top the average analyst estimate's call for revenue of $107.3 million. The company's non-GAAP (adjusted)loss per share for the quarter came in at $0.28, significantly better than the average analyst target expectations for a loss per share of $0.36. 

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Image source: Getty Images.

So what

Elastic's strong sales growth in the third quarter was aided by a 114% increase for software-as-a-service revenue, and the subscription momentum also paved the way for guidance that topped the market's expectations. Management anticipates fourth-quarter sales to land between $119 million and $120 million, representing roughly 48% year-over-year growth at the midpoint of the target. The company's adjusted loss per share for the quarter is projected to be between $0.30 and $0.32.

Now what

Elastic stock has given up last month's gains early in March's trading. Shares are down roughly 13% this month amid broader market sell-offs related to the novel coronavirus. 

ESTC Chart

ESTC data by YCharts.

Elastic has a leading position in its industry niche and a long runway for growth over the long term, but the stock's growth-dependent valuation suggests that it could be highly volatile if concerns about the novel coronavirus continue to weigh on the market. The company is valued at roughly 12 times this year's expected sales.

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Elastic N.V. Stock Quote
Elastic N.V.
$67.67 (-6.86%) $-4.98

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